TIDMJLG
RNS Number : 8471J
John Laing Group plc
22 August 2019
JOHN LAING GROUP PLC
RESULTS FOR THE SIX MONTHSED 30 JUNE 2019
John Laing Group plc (John Laing, the Company or the Group)
announces its unaudited results for the six months ended 30 June
2019
Highlights: Mixed H1 results - Full year outlook unchanged
-- Net asset value (NAV) of GBP1,599 million or 325p(1) per
share at 30 June 2019 (31 December 2018 - GBP1,586 million or 323p)
up 0.6% since 31 December 2018 or 3.0% including dividend paid in
May 2019
-- Portfolio value at 30 June 2019 of GBP1,535 million up 3.5%
on the rebased portfolio value(2) at 31 December 2018
-- Good operational performance but challenges in renewable
energy portfolio, mitigated by value enhancements and strong
project delivery:
-- GBP66 million of write downs on renewable energy assets in Australia due to industry transmission problems
-- GBP55 million of write downs on our European wind assets
-- GBP78 million of value enhancements delivered through active management across the portfolio and in all regions
-- Significant progress on projects including Sydney Light Rail and New Generation Rollingstock in Australia, Denver
Eagle P3 and I-77 in the US and IEP Phase 2 in the UK
-- Sale of all remaining fund management activities completed
-- New investments of GBP7 million (six months ended 30 June
2018 - GBP39 million)(3) . One further investment completed in
August, in North America, and another agreed and expected to
complete in September, our first investment in Latin America,
totalling approximately GBP137 million
-- Healthy pipeline of GBP2.1 billion of investment
opportunities. Solar and wind investments on hold in Europe and
Australia pending current issues resolution; investment in US
renewable energy assets limited to recycling of capital
-- Realisations of GBP131 million from the sale of three
investments (six months ended 30 June 2018 - GBP242 million from
the sale of two investments)
-- Profit Before Tax (PBT) of GBP35 million (six months ended 30
June 2018 - GBP175 million, which included an exceptional gain on
IEP Phase 1 disposal) and Earnings Per Share (EPS) of 7.1p (six
months ended 30 June 2018 - 38.8p)(4)
-- Interim dividend of 1.84p per share payable in October 2019
(six months ended 30 June 2018 - 1.80p per share) in line with
dividend policy
1. NAV per share at 30 June 2019 calculated as NAV of GBP1,599
million divided by the number of shares in issue at 30 June 2019 of
491.8 million, excluding the shares held in the Employee Benefit
Trust (EBT).
2. Rebased portfolio value is described in the Portfolio Valuation section.
3. Based on new investment commitments secured in the six months
ended 30 June 2019; for further details see the Business
Review.
4. Basic EPS; see note 7 to the Condensed Group Financial Statements.
Olivier Brousse, John Laing's Chief Executive Officer,
commented:
"Our operational performance in the first half was strong,
however we have had a number of challenges with our renewable
energy assets in Australia and Europe. We delivered value
enhancements across the portfolio, but predominantly in renewable
energy, which has helped to mitigate the impact of these
challenges. In addition, we made good progress on key assets in our
PPP portfolio. The Denver Eagle P3 commuter rail project fully
opened to the public in April, IEP Phase 2 commenced public train
services in May and Sydney Light Rail and New Generation
Rollingstock also progressed well in the last six months. Our asset
management teams have been instrumental in successfully progressing
all of these projects, protecting and enhancing the value of our
investments.
We are confident in our ability to continue to generate value
from our existing portfolio, to make the most of a secondary market
that remains strong and capitalise on the demand for operational
infrastructure. At the same time, our investment teams are actively
seeking new PPP investments, supported by our strong financial
resources and partner relationships. We are particularly pleased in
this regard to have agreed in July our first investment in Latin
America, with the Ruta del Cacao PPP road project in Colombia. New
renewable energy investments have been put on hold in Europe and
Australia, and limited to recycling of capital in North America, as
we re-assess our approach to risk and return in these markets.
Nevertheless, our pipeline remains healthy across our established
geographies and in new markets and sectors.
We remain confident in delivering our full year expectations,
underpinned by the value inherent in our existing portfolio and
further penetration of our targeted markets."
A presentation for analysts and investors will be held at 9:00am
(London time) today at The Lincoln Centre, 18 Lincoln's Inn Fields,
London WC2A 3ED. The presentation will be webcast on
https://www.investis-live.com/john-laing/5d3b0a179add6d11006d4f04/dsfg
A conference call facility will also be available using the
following dial in details:
UK: 020 3936 2999
Other locations: +44 20 3936 2999
Participant access code: 03 73 70
A copy of the presentation slides will be available at
www.laing.com later today.
Analyst/investor enquiries:
Olivier Brousse, Chief Executive Officer +44 (0)20 7901 3200
Luciana Germinario, Chief Financial Officer +44 (0)20 7901 3200
Media enquiries:
Matthew Denham / Camilla Cunningham, Teneo +44 (0)20 7420 3186
This announcement may contain forward looking statements. It has
been made by the Directors of John Laing in good faith based on the
information available to them up to the time of their approval of
this announcement and should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying such forward looking information.
Summary financial information Six months Six months Year
ended ended ended
or as at or as at or as at
30 June 30 June 31 December
GBP million (unless otherwise stated) 2019 2018 2018
Net asset value (NAV) 1,599 1,505 1,586
NAV per share(1) 325p 307p 323p
Profit before tax 35 175 296
Earnings per share (EPS)(2) 7.1p 38.8p 63.1p
Dividends per share 1.84p 1.80p 9.50p
-------------------------------------------------------------------- ----------- ----------- -------------
Primary Investment portfolio 896 636 868
Secondary Investment portfolio 639 624 692
-------------------------------------------------------------------- ----------- ----------- -------------
Total investment portfolio 1,535 1,260 1,560
Future investment commitments backed by letters of credit and cash
collateral 228 251 296
-------------------------------------------------------------------- ----------- ----------- -------------
Gross investment portfolio 1,763 1,511 1,856
-------------------------------------------------------------------- ----------- ----------- -------------
New investment committed during the period(3) 7 39 302
Cash invested in projects 89 131 342
Proceeds from investment realisations 131 242 296
Cash yield from investments 35 17 34
PPP investment pipeline(3) 1,883 1,567 1,543
Renewable energy pipeline(3) 175 733 830
-------------------------------------------------------------------- ----------- ----------- -------------
Notes:
(1) NAV per share at 30 June 2019 calculated as NAV of GBP1,599
million divided by the number of shares in issue at 30 June 2019 of
491.8 million, excluding the shares held in the EBT.
(2) Basic EPS; see note 7 to the Condensed Group Financial Statements.
(3) For further details, see the Business Review.
BUSINESS REVIEW
Overview and outlook
Our NAV increased from GBP1,586 million at 31 December 2018 to
GBP1,599 million at 30 June 2019. This is equivalent to 325p per
share and represents growth of 3.0% after adding back dividends
paid versus NAV per share of 323p per share at 31 December 2018.
This growth was lower than expected, primarily as a result of
industry transmission issues on three of our renewable energy
assets in Australia, which led to a write down of GBP66 million,
and performance issues for our wind assets in Europe, which led to
a write down of GBP55 million. For more details please refer to the
Regional Review section. At the same time and as part of the
overall portfolio optimisation strategy, we have identified and
delivered GBP78 million of value enhancements in the first half,
which helped to mitigate these losses. Actions will continue in to
the second half of the year and we expect to achieve further value
enhancements in our full year results.
In line with our dividend policy, we are declaring an interim
dividend for 2019 of 1.84p per share, a 2.2% increase versus 1.80p
for 2018.
Our investment portfolio was valued at GBP1,535 million at 30
June 2019, a decrease of GBP25 million from GBP1,560 million at 31
December 2018 reflecting the realisations completed in the first
half (see the Portfolio Valuation section for further details).
After adjusting the portfolio value at 1 January 2019 for
realisations, cash yield and cash invested into projects in the
period, the value of our portfolio increased by GBP52 million or
3.5% of this rebased value. Cash yield from investments in the six
months ended 30 June 2019 was GBP35 million, which included a large
distribution from the Denver Eagle P3 project.
Profit before tax in the period was GBP35 million (six months
ended 30 June 2018 - GBP175 million). The lower profit for the
first half of 2019, compared to the same period last year, is due
to the issues described above, as well as the significant one-off
gain of GBP87 million on disposal of the Group's investment in IEP
Phase 1 in the first half of 2018.
The first half highlights included:
-- Full revenue service on the Denver Eagle P3 project achieved on 26 April 2019, following substantial completion
of the third and final line, the G line, in March 2019;
-- The first section of road on the I-77 Managed Lanes project opened in June 2019;
-- A settlement agreed by all parties on Sydney Light Rail on 7 June 2019, which included a revised project
completion timetable;
-- On IEP Phase 2, the first 18 trains for the East Coast mainline have been accepted into service and public train
services commenced in May 2019;
-- The New Generation Rollingstock project achieved Partial Fleet Acceptance in the first half of the year and the
final train is due for delivery by the end of the year, in line with the delivery schedule agreed with the State
of Queensland;
-- Completion of the first disposals of operational assets in both Australia and the US.
Our investment commitments to date in 2019 are summarised in the
table below. Since 30 June 2019, we have completed one further
investment.
Renewable
PPP energy Total
Investment commitments Region GBP million GBP million GBP million
---------------------------------------------- --------------- ------------- ------------- -------------
University of Brighton student accommodation Europe 7 - 7
Total at 30 June 2019 7 - 7
--------------------------------------------------------------- ------------- ------------- -------------
August 2019: US wind farm North America - 75 75
---------------------------------------------- --------------- ------------- ------------- -------------
Total YTD 7 75 82
--------------------------------------------------------------- ------------- ------------- -------------
In addition, in July 2019, we agreed an investment in the Ruta
del Cacao road project in Colombia. This investment of
approximately GBP62 million is expected to complete in September
2019.
Our pipeline of PPP and renewable energy opportunities stood at
GBP2,058 million at 30 June 2019 (31 December 2018 - GBP2,373
million). This included:
-- The investment that closed in August 2019 as shown in the table above;
-- The investment in Colombia expected to complete in September 2019;
-- One preferred bidder position and eight shortlisted positions on PPP bids due to reach financial close in the
next two years, representing a total potential investment opportunity of approximately GBP268 million; and
-- One exclusive renewable energy position in Israel representing a potential investment opportunity of
approximately GBP20 million.
Following the operational issues experienced with our renewable
energy assets in Australia and Europe in the first half of 2019, we
have put on hold investments in solar and wind assets in these
regions. Investment in renewable energy assets in the US will be
limited to where capital is being recycled from renewable energy
disposals.
We are seeing growth in the PPP pipeline in the US and in
Australia, where the PPP market is now more active after a quieter
period, and the continued emergence of opportunities in Latin
America. This is reflected in the pipeline shown in the table
below.
The PPP pipeline comprises opportunities to invest equity in PPP
projects with the potential to reach financial close over the next
three years, while the renewable energy pipeline relates to the
next two years.
At 30 June 2019 At 31 December 2018
-------------------------- --------------------------
Pipeline - estimated equity investment Renewable Renewable
GBP million PPP energy Total PPP energy Total
---------------------------------------- ------ ---------- ------ ------ ---------- ------
North America 758 155 913 691 387 1,078
Europe 349 20 369 343 73 416
Asia Pacific 471 - 471 334 370 704
Latin America 305 - 305 175 - 175
Total 1,883 175 2,058 1,543 830 2,373
---------------------------------------- ------ ---------- ------ ------ ---------- ------
The total pipeline is broken down below according to the bidding
stage of each project. Our overall pipeline is constantly evolving
as new opportunities are added and others drop out.
Renewable
Number of PPP energy Total
Pipeline by bidding stage at 30 June 2019 projects GBP million GBP million GBP million
--------------------------------------------- ---------- ------------- ------------- -------------
Preferred bidder 1 28 - 28
Shortlisted / exclusive 10 240 95 335
Other 35 1,615 80 1,695
--------------------------------------------- ---------- ------------- ------------- -------------
Total 46 1,883 175 2,058
--------------------------------------------- ---------- ------------- ------------- -------------
The preferred bidder position and eight of the shortlisted
positions are on PPP bids as detailed in the table below:
Financial
close achieved
Preferred bidder / shortlisted or expected
PPP Projects by Region Description
East Rockingham Waste, Australia* Q1 2020 Asia Pacific Waste to Energy plant in Western Australia
Redfern Communities Plus, Q1 2021 Asia Pacific
Australia Social Housing Development in Sydney, Australia
Hurontario LRT, Ontario Q4 2019 North America Light rail system in the Greater Toronto area
Iowa Green Energy, Iowa Q4 2019 North America Utility system project for the University of
Iowa
Hamilton Rail, Ontario Q2 2020 North America Light rail system in Hamilton, Ontario
Jefferson Parkway, Colorado Q3 2020 North America 9.2 mile four-lane limited access toll highway
in Denver, Colorado
I-10 Mobile River Bridge, Q4 2020 North America Highway bridge and replacement in Mobile,
Alabama Alabama
Dartmouth Green Energy, New Q4 2020 North America
Hampshire Utility system project for Dartmouth College
Via15, Netherlands Q2 2020 Europe 12km greenfield road including a major bridge
in
the east of the Netherlands
---------------------------------- ---------------- -------------- ------------------------------------------------
* Preferred bidder position
In August 2019, we were shortlisted on a further PPP project bid
in Asia Pacific.
During the first half of 2019, we completed realisations
totalling GBP131 million from the sale of one PPP and two renewable
energy investments. These included the disposal of our interest in
Optus Stadium, which was our first sale of an operational asset in
Australia, and the disposal of the Rocksprings and Sterling wind
farms in the US, our first sales in the US. Aggregate prices
achieved were in line with the 2018 year end portfolio
valuation.
In June 2019, the Company completed the sale of its remaining
fund management activities by way of a novation of the Investment
Advisory Agreement (IAA) with JLEN Environmental Assets Group
Limited ("JLEN" - previously John Laing Environmental Assets Group
Limited) to Foresight Group, including the transfer of the
investment advisory team. The sale will allow the Company to focus
on its core business of investment in and active management of
greenfield infrastructure projects. The JLEN IAA made a relatively
small contribution to our profits compared to the fair value
movements from our investing activities.
Looking forward:
-- Investment commitments will be weighted towards the second half, including the investment already secured in the
period after 30 June 2019, and we are maintaining our guidance of approximately GBP1 billion over the three year
period 2019 - 2021;
-- With further sale processes underway, we continue to expect realisations over the same period to be broadly in
line with investment commitments; and
-- As previously stated, we continue to assess (i) other infrastructure classes that fit our business model and (ii)
new geographies where we see opportunities to invest alongside established partners at appropriate returns.
BOARD CHANGE
Luciana Germinario was appointed to the Board as Chief Financial
Officer Designate on 25 April 2019 and succeeded Patrick O'D Bourke
as CFO upon his retirement on 9 May 2019.
REGIONAL REVIEW
ASIA PACIFIC
At 30 June 2019, our portfolio of investments in the Asia
Pacific region comprised 14 assets (31 December 2018 - 15)
including eight in the Primary portfolio (31 December 2018 - eight)
and six in the Secondary portfolio (31 December 2018 - seven) with
a total value of GBP527 million (31 December 2018 - GBP505
million). The increase in portfolio value of GBP22 million in the
first half of 2019 is due to cash invested in to projects of GBP71
million, offset by disposals and cash yields received from projects
totalling GBP35 million and a small net overall fair value loss of
GBP14 million for the period.
In line with industry peers, we experienced transmission issues
relating to marginal loss factors ("MLFs"). MLFs are defined as the
portion of energy that is lost when electricity is transmitted
across the transmission and distribution networks due to
resistance. MLFs for operational assets are published annually by
the Australian Energy Market Operator ("AEMO"). In June 2019, AEMO
published final MLFs for the July 2019 - June 2020 financial year.
Based on these and draft MLFs for assets still under construction,
there were unfavourable results for three of our assets, whose
value together represented 11% of the Group's investment portfolio
at 31 December 2018. The total reduction in value was GBP66 million
in the first half of the year, based on forecasts obtained from an
external advisor. At the same time, active asset management has led
to us recognising GBP29 million of value enhancements across the
Australian portfolio, predominantly on renewable energy assets,
which have partially offset the losses. Further work in this area
is underway and we would expect further value enhancements in the
second half of the year. Our team in Australia heads a group of
approximately 20 renewable energy developers and investors which
has made a proposal supporting a rule change under a consultation
process with the Australian Energy Market Commission, which, if
accepted, is expected to mitigate the impact from MLFs.
Additionally, the team are working with advisors to explore project
specific opportunities around technical performance which could
provide further mitigation.
Further renewable energy investments have been put on hold in
Australia, as we re-assess our approach to risk and return on these
investments.
Active asset management in the region saw good progress made on
Sydney Light Rail, New Generation Rollingstock and New Royal
Adelaide Hospital in the last six months.
Sydney Light Rail
-- On 7 June 2019, a settlement was agreed by all parties. As part of this, we invested an additional AUD $12
million (GBP7 million) equity capital. The settlement also includes a revised project completion timetable.
-- All track work has been completed and daytime testing of the light rail vehicles is now underway, with operation
on a segment of the line expected by December 2019.
New Generation Rollingstock
-- The number of accepted trains is now 63 out of a total of 75 and the project recently achieved Partial Fleet
Acceptance.
-- The final train is due for delivery in Q4 2019, in line with the re-based train delivery schedule agreed with the
State of Queensland.
-- The programme for undertaking various retrofitting and rectification issues is progressing well.
New Royal Adelaide Hospital
-- Negotiations between the project company and the South Australian government, about the application of the
abatement regime due to the performance of the facilities management provider, are now well progressed with the
execution of a term sheet resolving historical abatement and adjusting the go forward KPI regime. The valuation
at 30 June 2019 reflects the executed term sheet. The term sheet remains subject to various approvals but is a
significant step in resolving these historical issues and placing the project on a sound footing for the future.
-- In addition, arbitration proceedings are ongoing with regard to legacy issues arising from the construction
phase.
We were pleased to have achieved our first realisation of an
operational asset in Australia - the disposal of our 50%
shareholding in Optus Stadium completed in March 2019.
The Primary Investment team has been successful in achieving one
preferred bidder position and one shortlisted position at 30 June
2019 on PPP deals in Australia, which are typically expected to
close over the next 18 months while renewable energy investments
have been paused. We were recently shortlisted on a further PPP bid
in Asia Pacific, pending formal announcement.
Renewable
Number of PPP energy Total
Asia Pacific pipeline by bidding stage at 30 June 2019 projects GBP million GBP million GBP million
---------------------------------------------------------- ---------- ------------- ------------- -------------
Preferred bidder 1 28 - 28
Shortlisted / exclusive 1 33 - 33
Other 9 410 - 410
---------------------------------------------------------- ---------- ------------- ------------- -------------
Total 11 471 - 471
---------------------------------------------------------- ---------- ------------- ------------- -------------
EUROPE
At 30 June 2019, our portfolio of investments in Europe
comprised 20 assets (31 December 2018 - 19) including four in the
Primary portfolio (31 December 2018 - three) and 16 in the
Secondary portfolio (31 December 2018 - 16) with a total value of
GBP574 million (31 December 2018 - GBP580 million). The small
decrease in portfolio value of GBP6 million in the first half of
2019 is due to a net fair value loss in the period of GBP11 million
and cash yields received from projects of GBP2 million, offset by
cash invested into projects of GBP7 million.
We experienced operational performance issues on our wind
assets, mainly driven by low levels of wind, which have translated
into lower long-term energy yield forecasts and resulted in write
downs in the period of GBP55 million. We have recognised GBP16
million of value enhancements, of which GBP14 million was from the
renewable energy portfolio, including extension of asset lives and
savings in operating costs, which partially offset the above losses
and other smaller losses on the Europe portfolio. Further value
enhancement opportunities are being explored for the second half of
the year.
As in Australia, new wind and solar investments in Europe have
been put on hold.
On IEP Phase 2, our largest investment, the first 18 trains for
the East Coast mainline, which have a similar design to IEP Phase
1, have been accepted into service and public train services
commenced in May 2019.
In the first half of the year, we secured an investment of GBP7
million in a student accommodation project with the University of
Brighton. The Primary Investment team had also secured one
shortlisted PPP position in the Netherlands and one exclusive pump
storage opportunity in Israel, which are expected to close over the
next 18 months.
Renewable
Number of PPP energy Total
Europe pipeline by bidding stage at 30 June 2019 projects GBP million GBP million GBP million
---------------------------------------------------- ---------- ------------- ------------- -------------
Preferred bidder - - - -
Shortlisted / exclusive 2 19 20 39
Other 11 330 - 330
---------------------------------------------------- ---------- ------------- ------------- -------------
Total 13 349 20 369
---------------------------------------------------- ---------- ------------- ------------- -------------
NORTH AMERICA
At 30 June 2019, our portfolio of investments in North America
comprised 12 assets (31 December 2018 - 14) including five in the
Primary portfolio (31 December 2018 - six) and seven in the
Secondary portfolio (31 December 2018 - eight) with a total value
of GBP423 million (31 December 2018 - GBP465 million). The decrease
in portfolio value of GBP42 million in the first half of 2019 is
principally due to disposals and cash yields received from projects
totalling GBP128 million, offset by cash invested into projects of
GBP11 million and a positive fair value movement of GBP75 million,
which includes GBP33 million of value enhancements recognised in
the period.
The sale of our 95.3% shareholding in Rocksprings wind farm in
Texas and our 92.5% shareholding in Sterling wind farm in New
Mexico in the first half of the year represented our first
disposals in the US. Proceeds are subject to customary
post-completion adjustments.
The North America portfolio of investments performed in line
with expectations.
Denver Eagle P3
-- The A line and the B line have been operating successfully since 2016 and have achieved above 97% on-time
performance.
-- Substantial completion for the third line, the G line, was achieved in March 2019.
-- Full revenue service of the overall project was achieved on 26 April 2019.
In August 2019, we completed an investment of GBP75 million in a
wind farm in the US. Additionally, six of the Group's eight
shortlisted PPP positions at 30 June 2019 are for potential
investments in North America, including two light rail projects in
Ontario, Canada and two road projects in the US.
Renewable
North America pipeline by bidding stage at 30 June Number of PPP energy Total
2019 projects GBP million GBP million GBP million
------------------------------------------------------ ---------- ------------- ------------- -------------
Preferred bidder - - - -
Shortlisted / exclusive 7 188 75 263
Other 9 570 80 650
------------------------------------------------------ ---------- ------------- ------------- -------------
Total 16 758 155 913
------------------------------------------------------ ---------- ------------- ------------- -------------
LATIN AMERICA
Our pipeline at 31 December 2018 included two investment
opportunities in Colombia. One of which, the Ruta del Cacao road
project, was agreed in July and is expected to complete in
September 2019. Our pipeline of investment opportunities has
increased from GBP175 million at 31 December 2018 to GBP305 million
at 30 June 2019.
Renewable
Latin America pipeline by bidding stage at 30 June Number of PPP energy Total
2019 Projects GBP million GBP million GBP million
------------------------------------------------------ ---------- ------------- ------------- -------------
Preferred bidder - - - -
Shortlisted / exclusive - - - -
Other 6 305 - 305
------------------------------------------------------ ---------- ------------- ------------- -------------
Total 6 305 - 305
------------------------------------------------------ ---------- ------------- ------------- -------------
We have further strengthened our team in the region and now have
three local employees in our Bogota office.
PORTFOLIO VALUATION
The Group's investments at 30 June 2019 were valued at GBP1,535
million compared to GBP1,560 million at 31 December 2018. After
adjusting for realisations, cash yield and cash invested, this
represented a positive movement in fair value of GBP52 million
(3.5%) on the rebased portfolio valuation:
Investments Listed
in projects investment Total
GBP million GBP million GBP million
--------------------------------------- ------------- ------------- -------------
Portfolio valuation at 1 January 2019 1,550 10 1,560
- Cash invested 89 - 89
- Cash yield (35) - (35)
- Proceeds from realisations (131) - (131)
Rebased portfolio valuation 1,473 10 1,483
- Movement in fair value 51 1 52
Portfolio valuation at 30 June 2019 1,524 11 1,535
--------------------------------------- ------------- ------------- -------------
Cash investment in respect of one new PPP asset made into during
the first half of 2019 totalled GBP7 million. In addition, equity
and loan note subscriptions of GBP82 million were made into
existing projects in the portfolio as they progressed through, or
completed, construction.
During the first half of 2019, the Group completed the
realisation of three investments for a total consideration of
GBP131 million. Cash yield from the portfolio during the six months
ended 30 June 2019 totalled GBP35 million.
The movement in fair value of GBP52 million is analysed in the
table below:
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
GBP million GBP million GBP million
-------------------------------------------------------- ----------------- ----------------- ------------------
Unwinding of discounting 53 48 98
Reduction of construction risk premia 35 23 43
Value uplift on financial closes - 3 43
Value enhancements 78 121 166
Net losses from project performance (44) (35) (36)
Impact of industry transmission forecasts in Australia (66) - -
Change in power and gas price forecasts (13) (3) (12)
Impact of foreign exchange movements (2) (1) 10
Change in macroeconomic assumptions (1) (5) (1)
Change in operational benchmark discount rates 12 43 43
Movement in fair value 52 194 354
-------------------------------------------------------- ----------------- ----------------- ------------------
Unwinding of discount and reduction of construction risk premia,
which totalled GBP88 million in the first half of 2019, are factors
of growth which we consider to be embedded in the portfolio value
and that should continue to contribute value uplift in the
future.
We have recognised GBP78 million of value enhancements in the
first half of the year that have partially offset the losses in the
period. Work in this area has continued in to the second half of
the year and we expect to achieve further value enhancements in our
full year results. Value enhancements in the first half of 2018 and
full year included a gain of GBP87 million on the disposal of IEP
Phase 1.
Net losses from project performance of GBP44 million include the
losses on the European wind assets of GBP55 million, described in
the Europe region review section above, and other smaller losses
across the portfolio, offset by value uplift of GBP24 million from
reduction in asset-specific risk premia reflecting the good
progress made in the half on certain PPP projects through active
asset management. As discussed in the Asia Pacific region review,
we suffered losses of GBP66 million on three of our Australian
renewable energy asset projects as a result of adverse changes in
MLFs.
The net benefit of GBP12 million from the change in operational
benchmark discount rates was on a number of renewable energy
investments in Europe in response to our understanding and
experience of the secondary market.
The split of the portfolio valuation between primary and
secondary investments and the movements in the period within each
are shown in the tables below:
30 June 2019 31 December 2018
Number of projects GBP million % Number of projects GBP million %
---------------------- ------------------- ------------ ------ ------------------- ------------ ------
Primary Investment 17 896 58.4 17 868 55.7
Secondary Investment 29 639 41.6 31 692 44.3
---------------------- ------------------- ------------ ------ ------------------- ------------ ------
Total 46 1,535 100.0 48 1,560 100.0
---------------------- ------------------- ------------ ------ ------------------- ------------ ------
Primary Investment GBP million
--------------------------------------- ------------
Portfolio valuation at 1 January 2019 868
- Cash invested 81
- Transfers to Secondary Investment (107)
--------------------------------------- ------------
Rebased portfolio valuation 842
- Movement in fair value 54
--------------------------------------- ------------
Portfolio valuation at 30 June 2019 896
--------------------------------------- ------------
Secondary Investment GBP million
--------------------------------------- ------------
Portfolio valuation at 1 January 2019 692
- Cash invested 8
- Cash yield (35)
- Proceeds from realisations (131)
- Transfers from Primary Investment 107
--------------------------------------- ------------
Rebased portfolio valuation 641
- Movement in fair value (2)
--------------------------------------- ------------
Portfolio valuation at 30 June 2019 639
--------------------------------------- ------------
Methodology
The methodology for the valuation of the investment portfolio is
unchanged from the methodology used as at 31 December 2018, as
described in the 2018 Annual Report and Accounts.
In arriving at the valuation as at 30 June 2019, we considered
and reflected changes to the two principal inputs, (i) forecast
cash flows from investments in projects and (ii) discount
rates.
The shareholding in JLEN was valued at its closing market price
on 30 June 2019 of 119.5p per share (31 December 2018 - 105.00p per
share).
The Directors have obtained an independent opinion from a third
party, which has considerable expertise in valuing the type of
investments held by the Group, that the investment portfolio
valuation as a whole represented a fair market value in the
conditions prevailing at 30 June 2019.
Discount rates
For the 30 June 2019 valuation, the overall weighted average
discount rate was 8.3% compared to the weighted average discount
rate at 31 December 2018 of 8.6%. The weighted average discount
rate at 30 June 2019 was made up of 8.6% (31 December 2018 - 8.8%)
for the Primary Investment portfolio and 7.8% (31 December 2018 -
8.1%) for the Secondary Investment portfolio. The reduction in the
weighted average discount rate for primary investments was
primarily the result of projects moving through construction as
well as reductions in project-specific risk premia on Sydney Light
Rail and New Generation Rollingstock in Australia and the managed
lanes projects in the US where positive progress has been achieved.
The reduction in the weighted average discount rate for secondary
investments was the result of renewable energy projects progressing
through their ramp-up periods as well as reductions in
project-specific risk premia on New Royal Adelaide Hospital, Alder
Hey Children's Hospital, A15 Road and Denver Eagle P3, reflecting
the progress made in the period, and reduction in the operational
benchmark discount rates for select investments.
The discount rate ranges used in the portfolio valuation at 30
June 2019 were as set out below:
At 30 June 2019 At 31 December 2018
----------------------------- --------------------------- ----------------------------
Primary Secondary Primary Secondary
Sector Investment Investment Investment Investment
----------------------------- ------------- ------------ ------------- -------------
PPP investments 6.5% - 11.1% 6.5% - 9.0% 6.9% - 11.7% 7.0% - 9.0%
Renewable energy investments 8.2% - 8.9% 6.4% - 8.5% 8.4% - 9.1% 6.8% - 10.0%
----------------------------- ------------- ------------ ------------- -------------
The table below shows the sensitivity of a 0.25% change in
discount rates:
Portfolio valuation Increase/(decrease) in valuation
Discount rate sensitivity GBP million GBP million
-------------------------- -------------------- ---------------------------------
+0.25% 1,479 (56)
- 1,535 -
-0.25% 1,594 59
-------------------------- -------------------- ---------------------------------
Energy yields
Revenues and therefore cash flows from investments in renewable
energy projects may be affected by the volume of power production,
for example from changes in wind or solar yield.
Our valuation of renewable energy projects assumes a P50 level
of electricity output based on reports by technical consultants.
The P50 output is the estimated annual amount of electricity
generation (in MWh) that has a 50% probability of being exceeded
and a 50% probability of being underachieved - both in any single
year and over the long term. Hence the P50 is the expected level of
generation over the long term. A P75 output means 75% probability
of exceedance and a P25 output means 25% probability of
exceedance.
The impact on the valuation at 30 June 2019 of a sample of
renewable energy assets with total value of GBP304 million from
changes in energy yield is shown below:
Portfolio valuation of sample of assets Increase/(decrease) in valuation
Energy yield sensitivity GBP million GBP million
-------------------------- ---------------------------------------- ---------------------------------
P75 267 (37)
P50 304 -
P25 339 35
-------------------------- ---------------------------------------- ---------------------------------
The sensitivities shown above assume that changes in energy
yields move in the same direction for all of the assets in the
sample. However, across a portfolio of renewable energy assets, any
actual change in forecast energy yields could be an increase for
some assets and a decrease on others.
Macroeconomic assumptions
During the first half of 2019, updates for actual macroeconomic
outcomes and assumptions had a net adverse impact of GBP1 million
(first half of 2018 - GBP5 million net adverse impact) on the
portfolio valuation. Movements of foreign currencies against
Sterling over the six months to 30 June 2019 resulted in net
adverse foreign exchange movements of GBP2 million (first half of
2018 - GBP1 million net adverse foreign exchange movements).
Additionally, during the first half of 2019, a decrease in forecast
power and gas prices resulted in a GBP13 million adverse fair value
movement (first half of 2018 - adverse fair value movement of GBP3
million).
The table below summarises the main macroeconomic and exchange
rate assumptions used in the portfolio valuation at 30 June 2019
and at 31 December 2018. The table also shows the impact from
changes in these assumptions and from changes in power and gas
prices and marginal loss factors in the period or year as well as
the sensitivity to the portfolio value from changes in the
future:
Assumption 30 June 2019 31 December 2018
----------------------- ---------------------------------- -------------------- --------------------
Long-term inflation UK RPI & RPIX 3.00% 3.00%
Europe CPI 1.75% - 2.00% 1.75% - 2.00%
US CPI 2.20% - 2.50% 2.20% - 2.50%
Asia Pacific CPI 2.00% - 2.75% 2.00% - 2.75%
Impact recognised in GBP(3) million GBP(3) million
the period/year
Sensitivity: change in GBP545 million GBP524 million
value of five PPP
investments with a total
value of
0.25% increase in c.GBP15 million c.GBP14 million
inflation c.GBP(14) million c.GBP(13) million
0.25% decrease in
inflation
----------------------- ---------------------------------- -------------------- --------------------
Exchange rates GBP/EUR 1.1165 1.1134
GBP/AUD 1.8121 1.8096
GBP/USD 1.2706 1.2748
GBP/NZD 1.8924 1.9000
Impact recognised in GBP(2) million GBP10 million
the period/year
Sensitivity: 5% movement of each relevant currency against +/- c.GBP57 million +/- c.GBP59 million
Sterling
Power and gas prices
Impact in the GBP(13) million GBP(12) million
period/year
Sensitivity: change in GBP272 million GBP343 million
value of seven renewable
energy investments with
a total value of
5% increase in power c.GBP26 million c.GBP18 million
and gas prices
5% decrease in power c.GBP(25) million c.GBP(18) million
and gas prices
Marginal loss factors
Impact recognised in GBP(66) million -
the period/year
Sensitivity: change in GBP225 million -
value of a sample of
renewable energy
investments with a total
value
of
5% increase in c.GBP30 million -
marginal loss factors
5% decrease in c.GBP(30) million -
marginal loss factors
The sensitivities shown above from changes in assumption is on
the basis that changes are in the same direction across all assets.
In reality, there could be an increase for some assets and a
decrease on others and as a result offsetting impacts.
Further analysis of the portfolio valuation is shown in the
following tables. The investment in JLEN is shown as "listed
investment" in all tables.
by geographical region
30 June 2019 31 December 2018
GBP million % GBP million %
------------------- ------------ ------ ------------ ------
Europe 574 37.4 580 37.2
Asia Pacific 527 34.3 505 32.4
North America 423 27.6 465 29.8
Listed investment 11 0.7 10 0.6
------------------- ------------ ------ ------------ ------
Total 1,535 100.0 1,560 100.0
------------------- ------------ ------ ------------ ------
There continues to be good diversification of the portfolio
across our regions. While all other regions saw an increase of
their portfolio values, the value of the portfolio in North America
reduced since 31 December 2018 due to disposals in the six months
ended 30 June 2019.
by time remaining of project concession/OPERATIONAL life
30 June 2019 31 December 2018
GBP million % GBP million %
----------------------- ------------ ------ ------------ ------
Greater than 25 years 972 63.4 1,113 71.4
20 to 25 years 381 24.8 262 16.8
15 to 20 years 56 3.6 133 8.5
10 to 15 years 115 7.5 42 2.7
Less than 10 years - - - -
Listed investment 11 0.7 10 0.6
----------------------- ------------ ------ ------------ ------
Total 1,535 100.0 1,560 100.0
----------------------- ------------ ------ ------------ ------
Split between PPP and renewable energy
30 June 2019 31 December 2018
GBP million % GBP million %
---------------------------- ------------ ------ ------------ ------
Primary PPP 749 48.9 686 44.0
Primary renewable energy 146 9.5 182 11.7
Secondary PPP 226 14.7 168 10.7
Secondary renewable energy 403 26.2 514 33.0
Listed investment 11 0.7 10 0.6
---------------------------- ------------ ------ ------------ ------
Total 1,535 100.0 1,560 100.0
---------------------------- ------------ ------ ------------ ------
The value of secondary renewable energy assets decreased during
the first half of 2019 from GBP514 million to GBP403 million
primarily as a result of the disposals of two wind farms in the US
as part of our continuing divestment programme.
by revenue type
30 June 2019 31 December 2018
GBP million % GBP million %
------------------- ------------ ------ ------------ ------
Availability 845 55.1 766 49.2
Volume 679 44.2 784 50.2
Listed investment 11 0.7 10 0.6
------------------- ------------ ------ ------------ ------
Total 1,535 100.0 1,560 100.0
------------------- ------------ ------ ------------ ------
Availability-based investments continued to make up the majority
of the portfolio at 30 June 2019. Renewable energy investments
comprise the majority of the volume-based investments. The increase
in the value of availability-based investments primarily reflects
the positive progress made on assets both in construction and
operation whilst the reduction in volume-based investments is
primarily due to the disposal of two wind farms in the US as well
as write downs on certain of the Australian and European renewable
energy assets. We expect to maintain balanced availability-based
investments in the portfolio in the medium-term.
by sector
30 June 2019 31 December 2018
GBP million % GBP million %
Transport - rail and rolling stock 517 33.7 487 31.2
Transport - roads and other 257 16.8 214 13.7
Environmental 549 35.7 697 44.7
Social infrastructure 201 13.1 152 9.8
Listed investment 11 0.7 10 0.6
------------------------------------ ------------ ------ ------------ ------
Total 1,535 100.0 1,560 100.0
------------------------------------ ------------ ------ ------------ ------
The disposal of two wind farms in the US in the first half of
the year has contributed to the reduction in the value of
environmental assets since 31 December 2018. Further cash
injections and positive fair value movements have resulted in
increases in value in the first half of 2019 in other sectors.
by currency
30 June 2019 31 December 2018
GBP million % GBP million %
----------------------------------- ------------ ------ ------------ ------
Sterling 399 26.0 371 23.8
US dollar 423 27.7 465 29.8
Australian and New Zealand dollar 527 34.3 505 32.4
Euro 186 12.0 219 14.0
Total 1,535 100.0 1,560 100.0
----------------------------------- ------------ ------ ------------ ------
By investment size
30 June 2019 31 December 2018
GBP million % GBP million %
------------------------------- ------------ ------ ------------ ------
Five largest investments 620 40.4 598 38.4
Next five largest investments 265 17.2 276 17.7
Remaining investments 639 41.7 676 43.3
Listed investment 11 0.7 10 0.6
------------------------------- ------------ ------ ------------ ------
Total 1,535 100.0 1,560 100.0
------------------------------- ------------ ------ ------------ ------
The valuation ranges for the five largest Primary investments
and the five largest Secondary investments are shown in the tables
below:
Primary
30 June 2019
GBP million
IEP Phase 2 More than 300
Clarence Correctional Centre 75 - 100
Sydney Light Rail 50 - 75
Finley Solar Farm 50 - 75
I-66 Managed Lanes 50 - 75
------------------------------ --------------
Secondary
30 June 2019
GBP million
------------------------------ -------------
Cypress Creek solar farms 100 - 125
Denver Eagle P3 75 - 100
Buckthorn Wind Farm 50 - 100
New Royal Adelaide Hospital 50 - 75
Klettwitz Wind Farm 25 - 50
------------------------------ -------------
At 30 June 2019, nine out of the ten largest investments were
outside the UK.
InVestment portfolio as at 30 June 2019
Primary Investment Secondary investment
-------------------------------------------------- --------------------------------------------------------------------------
Social
infrastructure
Health Alder Hey New Royal
Children's Adelaide
Hospital Hospital
40% (Europe) 17.26% (APAC)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Justice and Clarence Auckland South
emergency Correctional Corrections
services Centre Facility
80% (APAC) 30% (APAC)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Defence DARA Red Dragon
100% (Europe)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Other University
of Brighton
Student
Accommodation
85% (Europe)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Transport
Roads and other A6 Parkway A16 Road I-4 Ultimate A1 Germany A15 Netherlands A130
Netherlands 47.5% (Europe) 50% (NA) 42.5% (Europe) 28% (Europe) 100% (Europe)
85% (Europe)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
I-66 Managed I-75 Road I-77 Managed
Lanes 40% (NA) Lanes
10% (NA) 10% (NA)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
MBTA Automated
Fare
Collection
System
90% (NA)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Rail and rolling IEP Phase 2 Melbourne New Generation Denver Eagle
stock Metro Rollingstock P3
30% (Europe) 30% (APAC) 40% (APAC) 45% (NA)
--------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Sydney Light
Rail
32.5% (APAC)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Environmental
Waste and Speyside Cramlington
biomass Biomass Biomass
43.35% (Europe) 44.7% (Europe)
----------------- --------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Wind and solar Cherry Tree Finley Solar Granville Brantley Solar Buckleberry Buckthorn Fox Creek
Wind Farm Farm Wind Farm Farm* Solar Farm* Wind Farm Solar Farm*
100% (APAC) 100% (APAC) 49.8% (APAC) 100% (NA) 100% (NA) 90.05% (NA) 100% (NA)
--------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Sunraysia Glencarbry IS54 Solar IS67 Solar Horath Wind
Solar Wind Farm Farm* 100% Farm* 100% Farm
Farm 100% (Europe) (NA) (NA) 81.82% (Europe)
90.1% (APAC)
--------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Hornsdale Hornsdale 2 Hornsdale Kiata Wind
1 Wind Farm Wind Farm 3 Wind Farm Farm
30% (APAC) 20% (APAC) 20% (APAC) 72.3% (APAC)
--------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Klettwitz Nordergründe Pasilly Wind Rammeldalsberget
Wind Farm Wind Farm Farm Wind Farm
100% (Europe) 30% (Europe) 100% (Europe) 100% (Europe)
--------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
Sommette Wind St Martin Wind Svartvallsberget
Farm Farm Wind Farm
100% (Europe) 100% (Europe) 100% (Europe)
--------------- ---------------- --------------- ---------------- ------------------ ----------------- -----------------
APAC - Asia Pacific
NA - North America
*Cypress Creek projects
FINANCIAL REVIEW
Basis of preparation
There has been no change in the basis of preparation of the
financial statements, as described in the Financial Review section
of the 2018 Annual Report & Accounts, except as explained
below.
There has been a change in the reportable segments under IFRS 8
Operating Segments since last year. Following an internal
reorganisation, under which the Primary Investment and Asset
Management teams in each of the three core geographical regions
report to a single regional head, regional performance targets are
set, and information is reported to the Group's Board (the chief
operating decision maker under IFRS 8 Operating Segments) for the
purposes of resource allocation and assessment of performance on a
regional basis. Accordingly, the reportable segments under IFRS 8
are now based on regions which are currently: Asia Pacific, Europe,
North America and Latin America. Further reportable segments are
"Fund management", relating to the external fund management
activities for Jura Infrastructure Limited ("Jura") and JLEN, which
ceased in 2019, and "Central", which covers the corporate
activities at the Group's headquarters.
The Group adopted IFRS 16 Leases from 1 January 2019. For
further details, see note 2 to the Condensed Group Financial
Statements.
Re-presented financial RESULTS
As we have done in previous periods, we set out in this
Financial Review the Condensed Group Income Statement, the
Condensed Group Balance Sheet and the Condensed Group Cash Flow
Statement on the management reporting basis. When set out on the
management reporting basis, these statements are described as
"re-presented".
Re-presented income statement
Preparing the re-presented income statement involves a
reclassification of certain amounts within the Condensed Group
Income Statement principally in relation to the net gain on
investments at FVTPL. The net gain on investments at FVTPL in the
Condensed Group Income Statement includes fair value movements from
the portfolio of investments in non-recourse project companies and
also comprises income and costs that do not arise directly from
investments in this portfolio, including investment fees earned
from project companies by recourse subsidiaries that are held at
FVTPL.
Six months ended 30 June 2019 2018(c)
----------------------------------------------------------------- ------------------
Condensed Group Income Re-presented income Re-presented
Statement Adjustments statement income statement
------------------------ ------------ ------------------------- ------------------
GBP million GBP million GBP million GBP million
Fair value movements -
investment portfolio 52 - 52 194
Fair value movements -
other (1) (1)(a) (2) (1)
Investment fees from
projects 2 - 2 4
------------------------- ------------------------ ------------ ------------------------- ------------------
Net gain on investments
at fair value through
profit or loss 53 (1) 52 197
Investment management
services revenue 20 - 20 9
Project management
services revenue 3 - 3 3
Recoveries on financial
close - - - 3
Other income 23 - 23 15
Operating income 76 (1) 75 212
Third party costs (5) (5) (4)
Disposal costs (2) (2) (3)
Staff costs (20) (20) (18)
General overheads (8) (8) (6)
Post-retirement charges (1) 1(b) - -
Administrative expenses (36) 1 (35) (31)
Profit from operations 40 - 40 181
Finance costs (5) 1(a,b) (4) (5)
Post-retirement charges - (1)(b) (1) (1)
Profit before tax (PBT) 35 - 35 175
------------------------- ------------------------ ------------ ------------------------- ------------------
Notes:
a) Adjustment comprises GBP1 million of finance income in
recourse investment entity subsidiaries reclassified from 'fair
value movements - other' to 'finance costs'.
b) Under IAS 19, the costs of the pension schemes, including the
post-retirement medical benefits, comprise a service cost of GBP0.8
million, included in administrative expenses in the Condensed Group
Income Statement, and a finance charge of GBP0.3 million, included
in finance costs in the Condensed Group Income Statement. These
amounts are combined together under management reporting.
c) For a reconciliation between the Condensed Group Income
Statement and re-presented income statement for the six months
ended 30 June 2018, refer to the June 2018 Interim Accounts.
Profit before tax (PBT) for the six months ended 30 June 2019
was GBP35 million (2018 - GBP175 million). The main reason for the
lower PBT in the first half of 2019 compared to last year was the
reduction in fair value movement in the portfolio.
The movement in fair value on the portfolio for the six months
ended 30 June 2019, after adjusting for investments, cash yield and
realisations, was a GBP52 million gain (2018 - GBP194 million
gain). A significant contributor to the fair value movement in the
six months ended 30 June 2018 was the gain of GBP87 million on
disposal of the interest in IEP Phase 1. In contrast, despite
significant value enhancements of GBP78 million, the fair value
movement for the first half of 2019 suffered from losses of GBP66
million on three of our Australian renewable energy assets as a
result of the impact of marginal loss factors (see the Asia Pacific
section above) and from losses of GBP55 million on our European
renewable energy assets (see the Europe section above).
Other fair value movements for the six months ended 30 June 2019
comprised a GBP2 million loss which primarily related to standard
price adjustments on renewable energy disposals previously
completed.
The Group earned IMS revenue of GBP20 million (2018 - GBP9
million) from investment advisory and asset management services
primarily to Jura and JLEN. The increase from last year is due to
the proceeds received from the sale of the IAA with JLEN in the
first half as well as an acceleration of fee income from the second
half of the year following the termination of the IAA with Jura.
Going forward, the Group will only earn IMS revenue from the
provision of directors to project company boards (six months ended
30 June 2019 - GBP1 million; six months ended 30 June 2018 - GBP1
million).
The Group also earned PMS revenue of GBP3 million (2018 - GBP3
million) from the provision of services to project companies under
management services agreements.
The Group achieved recoveries of bidding costs on financial
closes of GBP0.5 million in the six months ended 30 June 2019 (2018
- GBP3 million).
Total staff costs for the six months ended 30 June 2019 are
higher than the same period last year due to: pay increases in line
with inflation (cGBP0.5 million); increase in average headcount for
the period with new recruits at higher average salaries (cGBP1
million); and one-off staff costs incurred in the first half of
2019 in relation to the termination of fund management activities.
We expect staff costs to be lower in the second half of the year
following the transfer of staff with the fund management
business.
General overheads have increased from last year principally due
to costs incurred in the first half of 2019 on one-off
project-related costs and corporate initiatives.
Finance costs of GBP4 million (2018 - GBP5 million) include
costs of the corporate banking facilities, net of any interest
income, with the decrease from last year primarily due to lower
investment activity in the first half of the year.
The Group's overall tax expense on profit from operations for
2019 was GBP0.6 million (2018 - expense of GBP0.2 million). This
comprised a tax expense of GBP0.2 million (2018 - expense of GBP0.5
million) in recourse group subsidiary entities that are
consolidated (shown in the 'Tax' line of the Condensed Group Income
Statement) and a tax expense of GBP0.4 million (2018 - credit of
GBP0.3 million) in recourse group subsidiary entities that are held
at FVTPL (included within 'net gain on investments at fair value
through profit or loss' on the Condensed Group Income Statement).
The contributions made to one of the Group's defined benefit
pension schemes are tax deductible when paid and, as a result,
there is minimal tax payable by the UK holding and asset management
activities of the Group. Capital gains from the realisation of
investments in projects are generally exempt from tax under the
UK's Substantial Shareholding Exemption for shares in trading
companies or under the overseas equivalent. To the extent this
exemption is not available, gains may be sheltered using current
year losses or losses brought forward within the Group's holding
companies. There are no losses in the Company but there are tax
losses in recourse group subsidiary entities that are held at FVTPL
(GBP144 million as at 31 December 2017).
The re-presented income statement for the six months ended 30
June 2019 and for the same period in 2018 by reportable segment is
shown in the tables below:
Six months ended 30 June 2019
----------------------------------------------------------------------------------------------------
North Latin Fund
Asia Pacific Europe America America Management Central Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Net gain/(loss)
on investments
at FVTPL (13) (13) 75 - - 3 52
Other income 1 1 1 - 20 - 23
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Operating
income (12) (12) 76 - 20 3 75
Staff costs (4) (3) (4) - (3) (6) (20)
Other
administrative
expenses (1) (3) (3) (1) (2) (5) (15)
----------------
Profit/(loss)
from
operations (17) (18) 69 (1) 15 (8) 40
Finance costs - - - - - (5) (5)
Profit/(loss)
before tax (17) (18) 69 (1) 15 (13) 35
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Six months ended 30 June 2018
----------------------------------------------------------------------------------------------------
North Latin Fund
Asia Pacific Europe America America Management Central Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Net gain/(loss)
on investments
at FVTPL 20 156 22 - - (1) 197
Other income 1 2 3 - 9 - 15
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Operating
income 21 158 25 - 9 (1) 212
Staff costs (4) (3) (2) - (3) (6) (18)
Other
administrative
expenses (1) (5) (2) (1) (1) (3) (13)
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Profit/(loss)
from
operations 16 150 21 (1) 5 (10) 181
Finance costs - - - - - (6) (6)
Profit/(loss)
before tax 16 150 21 (1) 5 (16) 175
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Asia Pacific - the loss in the first half of 2019 was mainly due
to write downs of GBP66 million in the portfolio from adverse
changes in MLFs on three of our renewable energy investments. Value
enhancements of GBP29 million recognised in the period partially
offset some of these losses. For further details, see the Asia
Pacific section in the Regional Review above.
Europe - the main drivers of the loss in the six months ended 30
June 2019 were performance issues on wind assets, which resulted in
write downs in the period of GBP55 million. Value enhancements
recognised in the half of GBP16 million across the Europe portfolio
helped to partially offset these write downs. In the same period in
2018, Europe benefited from a gain of GBP87 million on the disposal
of our interest in the IEP Phase 1 project.
North America - good progress was made on the PPP assets in the
US, which, together with value enhancements of GBP33 million,
contributed to the higher profit in the first half of 2019 compared
to 2018. Increasing staff costs in North America reflect an
increase in the headcount in that region, consistent with the
increase in the level of activity.
Fund management - fund management activities ceased in the first
half of 2019 following the sale of the JLEN IAA at the end of June
2019 and the termination of the Jura IAA at the end of April 2019.
The increase in profit from 2018 was primarily due to the proceeds
from the sale of the JLEN agreement of GBP5 million and additional
income of GBP4 million in the first half of 2019 from the Jura
agreement when services were terminated. There will be no further
income or costs from fund management activities beyond 30 June
2019.
Central - the net gain on investments at FVTPL of GBP3 million
in the first half of 2019 was primarily due to a gain on the JLEN
shares (2018 - GBP1 million loss primarily due to foreign exchange
losses outside of the portfolio).
Re-presented balance sheet
The re-presented balance sheet is reconciled to the Condensed
Group Balance Sheet at 30 June 2019 below. The re-presented balance
sheet involves the reclassification of certain amounts within the
Condensed Group Balance Sheet principally in relation to assets and
liabilities of GBP135 million within certain of the Company's
recourse subsidiaries. These subsidiaries are included in
investments at FVTPL in the Condensed Group Balance Sheet as a
result of the requirement under IFRS 10 to fair value investments
in these subsidiaries.
As at 30 June 2019 31 December
2018(e)
--------------------------------------------------- ------------------
Re-presented
Condensed Group Re-presented Re-presented balance sheet
Balance Sheet Adjustments balance sheet balance sheet line items
----------------- ------------ ------------------ ------------------ -----------------
GBP million GBP million GBP million GBP million
Non-current assets
Other long term
Right-of use assets 5 - 5 - assets
Investments at FVTPL 1,670 (135)(a) 1,535 1,560 Portfolio value
Cash collateral
- 129(b) 129 132 balances
Retirement benefit Pension surplus
asset 14 - 14 - (IAS 19)
1,689 (6) 1,683 1,692
----------------- ------------ ------------------ ------------------
Current assets
Trade and other
receivables 14 (14)(c) - -
Cash and cash
equivalents 2 5(b) 7 8 Cash
----------------- ------------ ------------------ ------------------
16 (9) 7 8
----------------- ------------ ------------------ ------------------
Total assets 1,705 (15) 1,690 1,700
----------------- ------------ ------------------ ------------------
Current liabilities
Working capital
and other
- (6)(b,c,d) (6) (4) balances
Borrowings (74) (3)(d) (77) (70) Cash borrowings
Trade and other
payables (18) 18(c) - -
(92) 9 (83) (74)
----------------- ------------ ------------------ ------------------
Net current
assets/(liabilities) (76) - (76) (66)
----------------- ------------ ------------------ ------------------
Non-current
liabilities
Retirement benefit Pension deficit
obligations (8) 8 - (32) (IAS 19)
Other retirement
benefit
- (8) (8) (8) obligations
Finance lease
liabilities (4) 4(c) - -
Provisions (2) 2(c) - -
----------------- ------------ ------------------ ------------------
(14) 6 (8) (40)
----------------- ------------ ------------------ ------------------
Total liabilities (106) 15 (91) (114)
----------------- ------------ ------------------ ------------------
Net assets 1,599 - 1,599 1,586
----------------- ------------ ------------------ ------------------
Notes:
a) Investments at fair value through profit or loss (FVTPL)
comprise: portfolio valuation of GBP1,535 million and other assets
and liabilities within recourse investment entity subsidiaries of
GBP135 million (see note 9 to the Condensed Group Financial
Statements).
b) Other assets and liabilities within recourse investment
entity subsidiaries of GBP135 million referred to in note (a)
include (i) cash and cash equivalents of GBP134 million, of which
GBP129 million is held to collateralise future investment
commitments and (ii) positive working capital and other balances of
GBP1 million.
c) Trade and other receivables (GBP14 million), trade and other
payables (GBP18 million), finance lease liabilities (GBP4 million)
and provisions (GBP2 million) are combined within working capital
and other balances.
d) Borrowings of GBP74 million comprise cash borrowings of GBP73
million from the main facilities and GBP4 million of short-term
bank overdraft from uncommitted facilities less unamortised
financing costs of GBP3 million, re-presented in working capital
and other balances.
e) For a reconciliation between the Group Balance Sheet and
re-presented balance sheet as at 31 December 2018, refer to the
2018 Annual Report and Accounts.
Components of net assets, including reportable segments, are
shown in the table below.
Asia Pacific Europe North America Latin America Fund management Central Total
As at 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------- -------- -------- -------- --------
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million million million million million
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------- -------- -------- -------- --------
Portfolio valuation 527 505 574 580 423 465 - - - - 11 10 1,535 1,560
Other net current
liabilities (1) (4) (1) (4)
Group net
cash/(borrowings)(1) 59 70 59 70
Net post-retirement
assets/(obligations) 6 (40) 6 (40)
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------- -------- -------- -------- --------
Group net assets 527 505 574 580 423 465 - - - - 75 36 1,599 1,586
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------- -------- -------- -------- --------
Note:
(1) Comprises cash balances of GBP136 million (31 December 2018
- GBP140 million) (see below for more details) net of short-term
bank overdraft of GBP4 million (31 December 2018 - GBP15 million)
and short-term cash borrowings of GBP73 million (31 December 2018 -
GBP55 million).
Net assets increased from GBP1,586 million at 31 December 2018
to GBP1,599 million at 30 June 2019.
The Group's portfolio of investments in project companies and
listed investments was valued at GBP1,535 million at 30 June 2019
(31 December 2018 - GBP1,560 million). Further details are provided
in the Portfolio Valuation section.
The Group held cash balances of GBP136 million at 30 June 2019
(31 December 2018 - GBP140 million) of which GBP129 million (31
December 2018 - GBP132 million) was held to collateralise future
investment commitments (see the Financial Resources section below
for more details). Of the total Group cash balances of GBP136
million, GBP134 million was held in recourse subsidiaries held at
FVTPL, including the cash collateral balances, that are included
within investments at FVTPL in the Condensed Group Balance Sheet.
The remaining GBP2 million was held in the Company and recourse
subsidiaries that are consolidated and shown as cash and cash
equivalents in the Condensed Group Balance Sheet (see the
re-presented balance sheet for further details).
Working capital and other liabilities were higher primarily
because of finance lease liabilities of GBP5 million at 30 June
2019 following adoption of IFRS 16 Leases from 1 January 2019.
The Group operates two defined benefit pension schemes in the UK
- the John Laing Pension Fund (JLPF) and the John Laing Pension
Plan (the Plan). Both schemes are closed to new members and future
accrual.
In December 2016, following a triennial actuarial review of JLPF
as at 31 March 2016, a seven-year deficit repayment plan was agreed
with the JLPF Trustee to repay the actuarial deficit of GBP171
million at 31 March 2016 as set out below:
By 31 March GBP million
------------- ------------
2017 25
2018 27
2019 29
2020 25
2021 26
2022 26
2023 25
------------- ------------
The combined net accounting surplus in the Group's defined
benefit pension and post-retirement medical schemes at 30 June 2019
was GBP6 million (31 December 2018 - deficit GBP40 million). Under
IAS 19, at 30 June 2019, JLPF recorded a surplus of GBP12 million
(31 December 2018 - deficit of GBP35 million) and the Plan recorded
a surplus of GBP2 million (31 December 2018 - surplus of GBP3
million). The liability at 30 June 2019 under the post-retirement
medical scheme was GBP8 million (31 December 2018 - GBP8
million).
The pension liabilities in JLPF under IAS 19 were based on a
discount rate of 2.3% (31 December 2018 - 2.85%) and long term RPI
of 3.2% (31 December 2018 - 3.2%) at 30 June 2019. The amount of
the liabilities is dependent on key assumptions, principally:
inflation rate, discount rate and life expectancy of members. The
discount rate, as prescribed by IAS 19, is based on yields from
high quality corporate bonds. The surplus (under IAS 19) as at 30
June 2019 has moved from a deficit at 31 December 2018 primarily as
a result of the Group's cash contribution to JLPF of GBP29 million
in March 2019 and gains in the value of scheme assets.
Re-presented cash flow statement
The Condensed Group Cash Flow Statement includes the cash flows
of the Company and certain recourse subsidiaries that are
consolidated (Service Companies). The Group's recourse investment
entity subsidiaries, through which the Company holds its
investments in non-recourse project companies, are held at fair
value in the financial statements and accordingly cash flows
relating to investments in the portfolio are not included in the
Condensed Group Cash Flow Statement. Investment-related cash flows
are disclosed in note 9 to the Condensed Group Financial
Statements.
The re-presented cash flow statement shows all recourse cash
flows that arise in both the consolidated group (the Company and
its consolidated subsidiaries) and in the recourse investment
entity subsidiaries.
Six months ended 30 June 2019 2018
------------------------ ------------------------
Re-presented cash flows Re-presented cash flows
GBP million GBP million
Cash yield 35 17
Operating cash flow (16) (9)
Net foreign exchange impact 3 3
Total operating cash flows 22 11
------------------------------------------------------------ ------------------------ ------------------------
Cash investment in projects (89) (131)
Proceeds from realisations 133 242
Disposal costs (2) (5)
------------------------------------------------------------ ------------------------ ------------------------
Net investing cash flows 42 106
------------------------------------------------------------ ------------------------ ------------------------
Finance charges (4) (4)
Rights issue (net of costs) - 210
Purchase of own shares related to share based incentives (4) -
Cash contributions to JLPF (29) (27)
Dividend payments (38) (35)
Net cash (outflow)/inflow from financing activities (75) 144
------------------------------------------------------------ ------------------------ ------------------------
Recourse group cash (outflow)/inflow (11) 261
------------------------------------------------------------ ------------------------ ------------------------
Recourse group opening balances 70 (28)
------------------------------------------------------------ ------------------------ ------------------------
Recourse group closing net cash balances 59 233
------------------------------------------------------------ ------------------------ ------------------------
Reconciliation to line items on re-presented balance sheet
------------------------------------------------------------ ------------------------ ------------------------
Cash collateral balances 129 134
------------------------------------------------------------ ------------------------ ------------------------
Other cash balances 7 110
------------------------------------------------------------ ------------------------ ------------------------
Total cash and cash equivalents 136 244
------------------------------------------------------------ ------------------------ ------------------------
Cash borrowings (77) (11)
------------------------------------------------------------ ------------------------ ------------------------
Net cash 59 233
------------------------------------------------------------ ------------------------ ------------------------
Reconciliation of cash borrowings to Condensed Group Balance Sheet
-------------------------------------------------------------------- ----- -----
Cash borrowings per re-presented balance sheet (77) (11)
-------------------------------------------------------------------- ----- -----
Unamortised financing costs 3 2
-------------------------------------------------------------------- ----- -----
Borrowings per Condensed Group Balance Sheet (74) (9)
-------------------------------------------------------------------- ----- -----
Cash yield comprised GBP35 million (2018 - GBP17 million) from
the investment portfolio, including a large cash distribution from
the Denver Eagle P3 project following construction completion in
the first half of the year.
Operating cash flow in the six months ended 30 June 2019 was
adverse compared to 2018 primarily due to higher staff costs in
2019 and small cash outflows in relation to tax in 2019 compared to
cash inflows in 2018 from the surrender of tax losses to project
companies.
Total operating cash flow was net of a favourable foreign
exchange impact of GBP3 million (2018 - favourable impact of GBP3
million).
During the period, cash of GBP89 million (2018 - GBP131 million)
was invested in project companies and investments in three projects
were realised for total proceeds of GBP131 million (2018 - GBP242
million from the realisation of two investments), offset by
disposal costs paid of GBP2 million (2018 - GBP5 million). A
further GBP2 million of proceeds from realisations was received
from the deferred consideration on the disposal of IEP Phase 1 in
2018.
In the period, the Group made a cash contribution to JLPF of
GBP29 million (2018 - GBP27 million).
Dividend payments of GBP38 million in the six months ended 30
June 2019 comprised the final dividend for 2018 (2018 - final
dividend for 2017 of GBP35 million).
FINANCIAL RESOURCES
At 30 June 2019, the Group held principal committed revolving
credit banking facilities of GBP650 million (31 December 2018 -
GBP650 million), GBP500 million expiring in July 2023 and GBP150
million expiring in January 2021, which are primarily used to back
investment commitments. Net available financial resources at 30
June 2019 were GBP458 million (31 December 2018 - GBP413
million).
Analysis of Group financial resources
30 June 31 December
2019 2018
GBP million GBP million
------------------------------------------------------------------------- ------------- -------------
Total committed facilities 650 650
------------------------------------------------------------------------- ------------- -------------
Letters of credit issued under corporate banking facilities (see below) (99) (139)
Letters of credit issued under surety facilities (22) (25)
Other guarantees and commitments (1) (10)
Short-term cash borrowings (73) (55)
Bank overdraft (uncommitted) (4) (15)
------------------------------------------------------------------------- ------------- -------------
Utilisation of facilities (199) (244)
------------------------------------------------------------------------- ------------- -------------
Headroom 451 406
Available cash and bank deposits(1) 7 7
Net available financial resources 458 413
------------------------------------------------------------------------- ------------- -------------
(1) Cash and bank deposits exclude cash collateral balances. Of
the total cash and bank deposit balances of GBP7 million, GBP2
million was in the Company and recourse subsidiaries that are
consolidated and therefore shown as cash and cash equivalents on
the Condensed Group Balance Sheet, with the remaining GBP5 million
in recourse subsidiaries held at FVTPL which are included within
investments at FVTPL on the Condensed Group Balance Sheet (see the
re-presented balance sheet).
Letters of credit and cash collateral represent future cash
investment by the Group into underlying projects in the Primary
Investment portfolio.
30 June 31 December
2019 2018
GBP million GBP million
-------------------------------------- ------------- -------------
Letters of credit issued(1) 99 164
Cash collateral 129 132
-------------------------------------- ------------- -------------
Future cash investment into projects 228 296
-------------------------------------- ------------- -------------
(1) A letter of credit issued under the committed facilities at
30 June 2019 of GBP22 million was cancelled in July 2019 after cash
was invested into the project in June 2019
Cash collateral is included within 'investments at fair value
through profit or loss' in the Condensed Group Balance Sheet.
FOREIGN CURRENCY EXPOSURE
The Group regularly reviews the sensitivity of its balance sheet
to changes in exchange rates relative to Sterling and to the timing
and amount of forecast foreign currency denominated cash flows. As
set out in the Portfolio Valuation section, the Group's portfolio
comprises investments denominated in Sterling, Euro, and
Australian, US and New Zealand dollars. As a result of foreign
exchange movements in the six months ended 30 June 2019, there was
a net adverse fair value movement of GBP2 million in the portfolio
valuation. Sterling strengthened against the Australian dollar and
the Euro between 31 December 2018 and 30 June 2019, but weakened
against the US and New Zealand dollars.
The Group may apply an appropriate hedge to a specific currency
transaction exposure, which could include borrowing in that
currency or entering into forward foreign exchange contracts. An
analysis of the portfolio value by currency is set out in the
Portfolio Valuation section.
Letters of credit in issue at 30 June 2019 of GBP121 million (31
December 2018 - GBP164 million) are analysed by currency as
follows:
30 June 31 December
2019 2018
Letters of credit by currency GBP million GBP million
------------------------------- ------------- -------------
US dollar 16 15
Australian dollar 105 149
------------------------------- ------------- -------------
Total 121 164
------------------------------- ------------- -------------
Cash collateral at 30 June 2019 of GBP129 million (31 December
2018 - GBP132 million) is analysed by currency as follows:
30 June 31 December
2019 2018
Cash collateral by currency GBP million GBP million
----------------------------- ------------- -------------
US dollar 129 132
Total 129 132
----------------------------- ------------- -------------
PRINCIPAL Risks AND GOING CONCERN
The Group's principal risks at 31 December 2018 were as
follows:
-- Governmental policy (incl. Brexit)
-- Macroeconomic factors
-- Liquidity in the secondary market
-- Financial resources
-- Pensions
-- Future investment activity
-- Valuation
-- Counterparty risk
-- Major incident
-- Investment Advisory Agreement (IAA) with JLEN and Jura
-- Future returns from investments
-- Taxation
-- Personnel
More detail on these risks can be found on pages 41 to 46 of the
2018 Annual Report & Accounts.
With the exception of the 'IAA with JLEN and Jura' risk, which
is no longer applicable following the termination of the Jura IAA
and the sale of the JLEN IAA, the Group does not believe there has
been a material change in the Group's principal risks in the first
six months of 2019, nor does it expect a material change in the
remaining six months of the year.
The Group has committed corporate banking facilities which
mature in July 2023 and has sufficient resources available to meet
its committed capital requirements, investment commitments and
operating costs for the foreseeable future. Accordingly, the
Directors continue to adopt the going concern basis in preparing
the Condensed Group Financial Statements.
Related party transactions
Related party transactions are disclosed in note 16 to the
Condensed Group Financial Statements. There have been no other
related party transactions in the first six months of the financial
year or the comparative period in 2018 that have had a material
effect on the financial position or performance of the Group.
Signed on behalf of the Directors
Olivier Brousse Luciana Germinario
Chief Executive Officer Chief Financial Officer
21 August 2019 21 August 2019
Responsibility statement
We confirm that to the best of our knowledge:
-- The Condensed Group Financial Statements have been prepared
in accordance with International Accounting Standard 34 'Interim
Financial Reporting'; and
-- The Business Review includes a fair review of the information required by:
a) the Disclosure and Transparency Rules (DTR) rule 4.2.7R,
being an indication of important events during the first six months
and a description of principal risks and uncertainties for the
remaining six months of the year; and
b) DTR rule 4.2.8R, being the disclosure of related party
transactions and changes therein.
By order of the Board
Olivier Brousse Luciana Germinario
Chief Executive Officer Chief Financial Officer
21 August 2019 21 August 2019
INDEPENT REVIEW REPORT TO JOHN LAING GROUP PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2019 which comprise the Condensed Group
Income Statement, the Condensed Group Statement of Comprehensive
Income, the Condensed Group Statement of Changes in Equity, the
Condensed Group Balance Sheet, the Condensed Group Cash Flow
Statement and the related notes 1 to 17. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
21 August 2019
Condensed Group Income Statement
for the six months ended 30 June 2019
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Notes Unaudited Unaudited Audited
-------------------------------------------------------- ------ ------------- ------------- -------------
Net gain on investments at fair value through profit
or loss 9 53 198 366
Other income 5 23 15 31
-------------------------------------------------------- ------ ------------- ------------- -------------
Operating income 3 76 213 397
Administrative expenses (excluding GMP equalisation
charge) (36) (32) (66)
GMP equalisation charge - - (21)
-------------------------------------------------------- ------ ------------- ------------- -------------
Total administrative expenses (36) (32) (87)
-------------------------------------------------------- ------ ------------- ------------- -------------
Profit from operations 40 181 310
Finance costs (5) (6) (14)
-------------------------------------------------------- ------ ------------- ------------- -------------
Profit before tax 3 35 175 296
Tax expense 6 - (1) -
-------------------------------------------------------- ------ ------------- ------------- -------------
Profit for the period attributable to the Shareholders
of the Company 35 174 296
-------------------------------------------------------- ------ ------------- ------------- -------------
Earnings per share (pence)
Basic 7 7.1 38.8 63.1
Diluted 7 7.1 38.3 62.4
Condensed Group Statement of Comprehensive Income
for the six months ended 30 June 2019
Six Six Year
months months ended
ended ended 31
30 June 30 June December
2019 2018 2018
GBP GBP GBP
Notes million million million
Unaudited Unaudited Audited
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------
Profit for the period 35 174 296
Remeasurement gain/(loss) on retirement benefit obligations 11 18 31 (3)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------
Other comprehensive income/(loss) for the period 18 31 (3)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------
Total comprehensive income for the period 53 205 293
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------
Condensed Group Statement of Changes in Equity
for the six months ended 30 June 2019
Share Share ESOP reserve Other Retained
capital premium GBP million reserves earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
-------------------- ------ ------------- ------------- ------------- ------------- ------------- -------------
Balance at 1
January 2019 49 416 - 6 1,115 1,586
Profit for the
period - - - - 35 35
Other comprehensive
income for the
period - - - - 18 18
-------------------- ------ ------------- ------------- ------------- ------------- ------------- -------------
Total comprehensive
income for the
period - - - - 53 53
Share-based
incentives 8 - - - 2 - 2
Vesting of
share-based
incentives 8, 12 - - - (4) 4 -
Purchase of own
shares related to
share-based
incentives 12 - - (4) - - (4)
Dividend paid(1) - - - - (38) (38)
-------------------- ------ ------------- ------------- ------------- ------------- ------------- -------------
Balance at 30 June
2019 (unaudited) 49 416 (4) 4 1,134 1,599
-------------------- ------ ------------- ------------- ------------- ------------- ------------- -------------
for the six months ended 30 June 2018
Share Share Other Retained
capital premium reserves earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 1 January 2018 37 218 6 863 1,124
Profit for the period - - - 174 174
Other comprehensive income for the
period - - - 31 31
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive income for the
period - - - 205 205
Share-based incentives 8 - - 1 - 1
Vesting of share-based incentives 8, 12 - - (3) 3 -
Net proceeds from issue of shares 13 12 198 - - 210
Dividend paid(1) - - - (35) (35)
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 30 June 2018
(unaudited) 49 416 4 1,036 1,505
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
for the year ended 31 December 2018
Share Share Other Retained
capital premium reserves earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 1 January 2018 37 218 6 863 1,124
Profit for the year - - - 296 296
Other comprehensive loss for the
year - - - (3) (3)
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive income for the
year - - - 293 293
Share-based incentives 8 - - 3 - 3
Vesting of share-based incentives 8 - - (3) 3 -
Net proceeds from issue of shares 13 12 198 - - 210
Dividends paid(1) - - - (44) (44)
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 31 December 2018
(audited) 49 416 6 1,115 1,586
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
(1) Dividends paid:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Pence Pence Pence
Dividends on ordinary shares Unaudited Unaudited Audited
------------------------------ ----------- ----------- -------------
Per ordinary share:
* interim proposed 1.84 1.80 1.80
----------- ----------- -------------
* interim paid - - 1.80
----------- ----------- -------------
* final proposed - - 7.70
----------- ----------- -------------
* final paid 7.70 7.17(a) 7.17(a)
----------- ----------- -------------
(a) The final dividend for 2017 was originally reported in the
2017 Annual Report and Accounts as 8.70p. This was adjusted for the
Rights Issue to 7.17p and paid in May 2018.
The total estimated amount to be paid in October 2019 in respect
of the proposed interim dividend for 2019 is GBP9 million.
Condensed Group Balance Sheet
as at 30 June 2019
31 December
30 June 2019 2018
Notes GBP million GBP million
------------- ------------
Unaudited Audited
Assets
Non-current assets
Right-of-use assets 2 5 -
Investments at fair value through profit or loss 9 1,670 1,700
Retirement benefit assets 11 14 -
1,689 1,700
------------- ------------
Current assets
Trade and other receivables 14 8
Cash and cash equivalents 2 6
16 14
------------- ------------
Total assets 1,705 1,714
------------- ------------
Equity and liabilities
Equity
Share capital 12 49 49
Share premium 13 416 416
ESOP reserve (4) -
Other reserves 4 6
Retained earnings 1,134 1,115
------------- ------------
Total equity 1,599 1,586
------------- ------------
Non-current liabilities
Retirement benefit obligations 11 8 40
Finance lease liabilities 4 -
Provisions 2 2
14 42
------------- ------------
Current liabilities
Borrowings 74 66
Trade and other payables 18 20
92 86
------------- ------------
Total liabilities 106 128
------------- ------------
Total equity and liabilities 1,705 1,714
------------- ------------
Condensed Group Cash Flow Statement
for the six months ended 30 June 2019
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Notes Unaudited Unaudited Audited
---------------------------------------------------------- ------ ------------- ------------- -------------
Net cash outflow from operating activities 14 (48) (45) (54)
---------------------------------------------------------- ------ ------------- ------------- -------------
Investing activities
Net cash transferred from investments held at fair
value through profit or loss 9 83 106 12
Net cash from investing activities 83 106 12
---------------------------------------------------------- ------ ------------- ------------- -------------
Financing activities
Net proceeds from issue of shares 13 - 210 210
Purchase of own shares related to share-based incentives (4) - -
Dividends paid (38) (35) (44)
Finance costs paid (5) (6) (15)
Proceeds from borrowings 18 - 15
Repayment of borrowings (10) (165) (121)
---------------------------------------------------------- ------ ------------- ------------- -------------
Net cash (used in) / from financing activities (39) 4 45
---------------------------------------------------------- ------ ------------- ------------- -------------
Net (decrease) / increase in cash and cash equivalents (4) 65 3
Cash and cash equivalents at beginning of the period 6 3 3
Cash and cash equivalents at end of the period 2 68 6
---------------------------------------------------------- ------ ------------- ------------- -------------
Notes to the Condensed Group Financial Statements
for the six months ended 30 June 2019
1 General information
The Condensed Group Financial Statements of John Laing Group plc
(the Company or the Group) have been prepared as described below.
The registered office of the Company is 1 Kingsway, London, WC2B
6AN. The principal activity of the Company is the origination,
investment in and management of greenfield infrastructure
projects.
The Condensed Group Financial Statements are presented in
Sterling and have been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting, as adopted by
the European Union.
The financial information for the year ended 31 December 2018
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for that
year has been delivered to the Registrar of Companies. The
auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006. The annual financial statements of John Laing Group plc
are prepared in accordance with IFRS as adopted by the European
Union. The Condensed Group Financial Statements included in this
half-yearly financial report have been prepared in accordance with,
and contain the information required by IAS 34 Interim Financial
Reporting, as adopted by the European Union, and the disclosure
guidance and transparency rules of the Financial Conduct
Authority.
The same accounting policies, presentation and methods of
computation are followed in these Condensed Group Financial
Statements as were applied in John Laing Group plc's latest annual
audited financial statements with the exception that the Group has
adopted in these Condensed Group Financial Statements IFRS 16
Leases. As required by IAS 34, the nature and effect of these
changes are disclosed below.
Several other amendments and interpretations apply for the first
time in 2019, but do not have an impact on the interim condensed
consolidated financial statements of the Group.
2 Accounting policies
Basis of preparation
The Condensed Group Financial Statements have been prepared on
the historical cost basis except for (i) the revaluation of the
investment portfolio and (ii) financial instruments that are
measured at fair value at the end of each reporting period. The
Company concluded that it meets the definition of an investment
entity set out within IFRS 10 Consolidated Financial Statements,
paragraph 27 on the basis described in the notes to the Group
financial statements in the 2018 Annual Report and Accounts.
Investment entities are required to account for all investments
in controlled entities, as well as investments in associates and
joint ventures, at fair value through profit or loss (FVTPL),
except for those directly-owned subsidiaries that provide
investment-related services or engage in permitted
investment-related activities with investees (Service Companies).
Service Companies are consolidated rather than recorded at
FVTPL.
Project companies in which the Group invests are described as
"non-recourse", which means that providers of debt to such project
companies do not have recourse to John Laing beyond its equity
and/or subordinated debt commitments in the underlying projects.
Subsidiaries through which the Company holds its investments in
project companies, which are held at FVTPL, and subsidiaries that
are Service Companies, which are consolidated, are described as
"recourse".
Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future,
being a period of not less than 12 months from the date of approval
of this report. Accordingly, they continue to adopt the going
concern basis in preparing the Condensed Group Financial
Statements.
Changes in accounting policies
IFRS 16 Leases
The Group adopted IFRS 16 Leases using the modified
retrospective method of adoption with a date of application of 1
January 2019. This method involves measuring the right-of-use asset
at an amount equal to the lease liability at the transition date.
As permitted under this method, the Group has not restated
comparatives for the 2018 reporting period. The Group elected to
use the practical expedient allowing the standard to be applied
only to contracts that were previously identified as leases
applying IAS 17 Leases and IFRIC 4 Determining Whether an
Arrangement Contains a Lease - at the date of initial application.
The Group also elected to use the recognition exemptions for lease
contracts that, at the commencement date, have a lease term of 12
months or less and do not contain a purchase option ('short-term
leases'), and lease contracts for which the underlying asset is of
low value ('low value assets') being those assets with a value less
than GBP5,000.
The Group recognised lease liabilities in relation to leases
which had previously been classified as 'operating leases' under
the principles of IAS 17. These liabilities were measured at the
present value of the remaining lease payments, discounted using the
lessee's incremental borrowing rate as of 1 January 2019. The
weighted average lessee's incremental borrowing rate applied to the
lease liabilities on 1 January 2019 was 2.75%.
The effect of adoption of IFRS 16 is as follows:
31 December
2018
GBP million
(Unaudited)
------------------------- -------------
Assets
Right-of-use assets 5
Total assets 5
Liabilities
Finance lease liability (5)
------------------------- -------------
Total liabilities (5)
Equity
Retained earnings -
------------------------- -------------
Total equity -
------------------------- -------------
A reconciliation of the Group's outstanding commitments for
future minimum lease payments under non-cancellable operating
leases for land and buildings previously disclosed in the 2018
Annual Report & Accounts to the lease liability recognised
under IFRS 16 is shown below.
31 December
2018
GBP million
(Unaudited)
------------------------------- -------------
Within one year (1)
In the second to fifth years
inclusive (3)
After five years (2)
(6)
------------------------------- ---------------
Discount on lease liability 1
Total liabilities recognised
under IFRS 16 (5)
------------------------------- ---------------
The impact on the Condensed Group Income Statement for the six
months ended 30 June 2018 from recognising an interest expense on
the lease liability and depreciation of the right-to-use asset in
contrast to the operating lease charge, which would have been
applied under IAS 17, was a net GBP0.1 million credit.
Critical accounting judgements and key sources of estimation
uncertainty
The Group's critical accounting judgements and key sources of
estimation uncertainty are set out in note 4 of the Group's 2018
Annual Report & Accounts. The critical accounting judgements
disclosed were the methodology for valuing the Group's investment
portfolio ( incorporating key inputs including the discount rate
and the evidence available for the inclusion of value enhancements)
and that there is no minimum funding requirement under IFRIC14. The
key sources of estimation uncertainty in valuing the Group's
investment portfolio were the discount rates adopted, the long term
inflation rate and long term power prices and on the Group's
pension schemes the discount, inflation and mortality rates
adopted. The only change this period are the addition of key
sources of estimation uncertainty for the impact of marginal loss
factors impacting Australian renewable energy assets and future
energy yields impacting all renewable energy assets.
3 Operating segments
Following an internal reorganisation, under which the Primary
Investment and Asset Management teams in each of the three core
geographical regions report to a single regional head, information
is now reported to the Group's Board (the chief operating decision
maker under IFRS 8 Operating Segments) for the purposes of resource
allocation and assessment of performance on a regional basis.
Regional performance targets have also been set. Accordingly, the
reportable segments under IFRS 8 are now based on regions which are
currently: Asia Pacific, Europe, North America and Latin America.
Further reportable segments are "Fund management", relating to the
external fund management activities for Jura and JLEN, which ceased
in 2019, and "Central", which covers the corporate activities at
the Group's headquarters. The prior period segmental information
has been restated accordingly.
The Board's primary measure of profitability for each segment is
profit before tax (PBT).
The following is an analysis of the Group's operating income and
PBT for the six months ended 30 June 2019 and 2018 and for the year
ended 31 December 2018 for each segment:
Six months ended 30 June 2019
----------------------------------------------------------------------------------------------------
North Latin Fund
Asia Pacific Europe America America Management Central Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Net gain on
investments
at FVTPL (13) (13) 75 - - 4 53
Other income 1 1 1 - 20 - 23
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Operating
income (12) (12) 76 - 20 4 76
Administrative
expenses (5) (6) (7) (1) (5) (12) (36)
----------------
Profit from
operations (17) (18) 69 (1) 15 (8) 40
Finance costs - - - - - (5) (5)
Profit before
tax (17) (18) 69 (1) 15 (13) 35
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Six months ended 30 June 2018 (restated)
----------------------------------------------------------------------------------------------------
North Latin Fund
Asia Pacific Europe America America Management Central Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Net gain on
investments
at FVTPL 20 156 22 - - - 198
Other income 1 2 3 - 9 - 15
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Operating
income 21 158 25 - 9 - 213
Administrative
expenses (5) (8) (4) (1) (4) (10) (32)
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Profit from
operations 16 150 21 (1) 5 (10) 181
Finance costs - - - - - (6) (6)
Profit before
tax 16 150 21 (1) 5 (16) 175
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Year ended 31 December 2018 (restated)
----------------------------------------------------------------------------------------------------
North Latin Fund
Asia Pacific Europe America America Management Central Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Net gain on
investments
at FVTPL 86 188 88 - - 4 366
Other income 2 4 6 - 19 - 31
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
Operating
income 88 192 94 - 19 4 397
Administrative
expenses
(excluding GMP
equalisation
charge) (10) (17) (9) (1) (9) (20) (66)
GMP
equalisation
charge - - - - - (21) (21)
----------------
Profit from
operations 78 175 85 (1) 10 (37) 310
Finance costs - - - - - (14) (14)
Profit before
tax 78 175 85 (1) 10 (51) 296
---------------- ------------- ------------ ------------- ------------- ------------- ------------ ------------
For the six months ended 30 June 2019, the Group held four (six
months ended 30 June 2018 - two; year ended 31 December 2018 - two)
investments from which it received more than 10% of its operating
income. The operating income from the four investments was GBP20
million, GBP19 million, GBP16 million and GBP10 million, which is
reported within the North America and Europe segments. The Group
treats each investment in a project company as a separate customer
for purposes of IFRS 8.
The Group's investment portfolio valuation is the aggregation of
the values of the investment portfolios in each region where the
investments are actively managed. The investment in JLEN is managed
centrally. Other assets and liabilities, including cash balances
and borrowings as well as retirement benefit obligations, are also
predominantly managed centrally.
30 June 31 December
2019 2018
GBP million GBP million
Unaudited Audited
-------------------------------- ------------- -------------
Asia Pacific 527 505
Europe 574 580
North America 423 465
Central 11 10
-------------------------------- ------------- -------------
Portfolio valuation 1,535 1,560
Other assets and liabilities 135 140
-------------------------------- ------------- -------------
Investments at FVTPL 1,670 1,700
Retirement benefit assets 14 -
Other assets 21 14
-------------------------------- ------------- -------------
Total assets 1,705 1,714
-------------------------------- ------------- -------------
Retirement benefit obligations (8) (40)
Other liabilities (98) (88)
-------------------------------- ------------- -------------
Total liabilities (106) (128)
-------------------------------- ------------- -------------
Group net assets 1,599 1,586
-------------------------------- ------------- -------------
Other assets and liabilities within investments at FVTPL above
include cash and cash equivalents, trade and other receivables and
trade and other payables within recourse investment entity
subsidiaries.
4 Seasonality
Neither operating income nor profit are impacted by
seasonality.
5 Other income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Unaudited Unaudited Audited
--------------------------------------- ------------- ------------- -------------
Fees from asset management services 18 12 27
Sale of investment advisory agreement 5 - -
Recovery of bid costs - 3 4
Total other income 23 15 31
--------------------------------------- ------------- ------------- -------------
The Company completed the sale of its remaining fund management
activities by way of a novation of the Investment Advisory
Agreement with JLEN and transfer of the investment advisory team to
Foresight Group.
6 Tax
The tax expense for the period comprises:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Unaudited Unaudited Audited
------------------------------------ ------------- ------------- -------------
Deferred tax:
Deferred tax expense - prior period - (1) -
------------------------------------ ------------- ------------- -------------
- (1) -
------------------------------------ ------------- ------------- -------------
Tax expense - (1) -
------------------------------------ ------------- ------------- -------------
For the six months ended 30 June 2019, a tax rate of 19.0% has
been applied (six months ended 30 June 2018 and year ended 31
December 2018 - 19.0%).
7 Earnings per share
The calculation of basic and diluted earnings per share (EPS) is
based on the following data:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Unaudited Unaudited Audited
------------------------------------------------------- ------------- ------------- -------------
Earnings
Profit for the purpose of basic and diluted EPS 35 174 296
Profit for the period 35 174 296
------------------------------------------------------- ------------- ------------- -------------
Number of shares
Weighted average number of ordinary shares for the
purpose of basic EPS 491,189,378 447,876,982 469,502,029
Dilutive effect of ordinary shares potentially issued
under share-based incentives (note 8) 5,105,290 5,680,493 5,535,545
------------------------------------------------------- ------------- ------------- -------------
Weighted average number of ordinary shares for the
purpose of diluted EPS 496,294,668 453,557,475 475,037,574
------------------------------------------------------- ------------- ------------- -------------
Earnings per share (pence)
Basic 7.1 38.8 63.1
Diluted 7.1 38.3 62.4
8 Share-based PAYMENTS
The total expense recognised in the Condensed Group Income
Statement for all awards granted under share-based incentive
arrangements for the six months ended 30 June 2019 was GBP2 million
(six months ended 30 June 2018 - GBP1 million; year ended 31
December 2018 - GBP3 million). The GBP2 million is charged in
arriving at profit for the period and is a credit in Other reserves
in the Condensed Group Statement of Changes in Equity. An amount of
GBP4 million has been transferred from other reserves to retained
earnings in respect of awards previously granted under share-based
incentive arrangements that vested and were exercised in the six
months ended 30 June 2019.
Long-term incentive plan (LTIP)
The Group operates share-based incentive arrangements for
Executive Directors, senior executives and other eligible employees
under which awards are granted over the Company's ordinary shares.
Awards are conditional on the relevant employee remaining in
employment from the date of grant to the vesting date (the vesting
period) and are subject to the Plan Rules. The awards vest three
years from the grant date, subject to the Group achieving a target
share-based performance condition, total shareholder return (50% of
the award), and a non-share based performance condition, NAV per
share growth (50% of the award). The Group has no legal or
constructive obligation to repurchase or settle the awards in
cash.
The movement in the number of shares awarded under the LTIP was
as follows:
Number of shares
-----------------------------------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
---------------------------------------------- ------------ ------------ -------------
At beginning of the period 5,216,928 5,258,970 5,258,970
Granted 1,506,698 1,747,340 1,747,340
Adjustment for the Rights Issue bonus factor - 444,565 436,067
Lapsed (402,558) (671,097) (842,082)
Vested (1,878,182) (1,383,367) (1,383,367)
---------------------------------------------- ------------ ------------ -------------
At end of the period 4,442,886 5,396,411 5,216,928
---------------------------------------------- ------------ ------------ -------------
In addition to the 1,878,182 shares that vested per the table
above, a further 108,414 shares were awarded in lieu of dividends
payable since the grant date on the vested shares (see note
12).
Deferred Share Bonus Plan (DSBP)
In accordance with the DSBP, 112,554 awards over shares were
granted on 18 April 2019 to Executive Directors and certain senior
executives in relation to that part of their annual bonus for 2018
which exceeded 60% of their base salary. Awards under the DSBP vest
in equal tranches on the first, second and third anniversary of
grant, normally subject to continued employment and are subject to
the Plan Rules.
The movement in the number of shares awarded under the DSBP was
as follows:
Number of shares
-----------------------------------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
At beginning of the period 175,141 63,121 63,121
Granted 112,554 138,987 138,987
Adjustment to awards granted in prior periods - (8) (8)
Adjustment for the Rights Issue bonus factor - 5,647 5,647
Vested (112,087) (32,606) (32,606)
At end of the period 175,608 175,141 175,141
In addition to the 112,087 shares that vested as per the table
above, a further 3,907 shares were awarded in lieu of dividends
payable since the grant date on the vested shares (see note
12).
Buy-out award
In May 2019, the Chief Financial Officer was granted a buy-out
award over 65,044 shares, in compensation for cash-based long-term
incentive awards that were forfeited on leaving her previous
employer. There are six awards which individually vest between 4
months and 3 years and 4 months from the date of grant and are
subject to continued employment and the Plan Rules. There were
65,044 awards outstanding at 30 June 2019.
Employee Benefit Trust (EBT)
On 19 June 2015, the Company established an EBT to be used as
part of the remuneration arrangements for employees. The purpose of
the EBT is to facilitate the ownership of shares by or for the
benefit of employees through the acquisition and distribution of
shares in the Company. The EBT is able to acquire shares in the
Company to satisfy obligations under the Company's share-based
incentive arrangements. At 1 January 2019, the EBT held 811 shares.
During the six months ended 30 June 2019, 2,225,000 new shares in
John Laing Group plc were issued to the EBT with which to satisfy
obligations under share-based incentive arrangements. 2,102,590 of
share awards vested and were exercised in the period under these
arrangements leaving 123,221 shares held by the EBT.
Subsequent to the awards being made, certain employees elected
to sell shares in order to satisfy tax liabilities arising on the
awards. Of the 1,288,377 shares elected to be sold, the EBT was
able to sell 174,380 shares in the open market and acquired the
remaining 1,113,997 shares. The acquisition of shares by the EBT
was funded by the Company and as a result of this transaction, a
charge of GBP4 million has been made through reserves in the
Condensed Group Statement of Changes in Equity. Following this
acquisition, the total number of shares held by the EBT at 30 June
2019 was 1,237,218, which are excluded for the purposes of
calculating earnings per share and NAV per share.
9 Investments at fair value through profit or loss
30 June 2019
Portfolio
Project Listed valuation Other assets Total investments
companies investment sub-total and liabilities at FVTPL
GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited
Opening balance 1,550 10 1,560 140 1,700
Distributions (35) - (35) 35 -
Investment in equity and loans 89 - 89 (89) -
Realisations from investment portfolio (131) - (131) 131 -
Fair value movement 51 1 52 1 53
Net cash transferred from investments
held
at FVTPL - - - (83) (83)
Closing balance 1,524 11 1,535 135 1,670
31 December 2018
Portfolio
Project Listed valuation Other assets Total investments
companies investment sub-total and liabilities at FVTPL
GBP million GBP million GBP million GBP million GBP million
Audited Audited Audited Audited Audited
Opening balance 1,184 10 1,194 152 1,346
Distributions (33) (1) (34) 34 -
Investment in equity and loans 342 - 342 (342) -
Realisations from investment portfolio (296) - (296) 296 -
Fair value movement 353 1 354 12 366
Net cash transferred from investments
held
at FVTPL - - - (12) (12)
Closing balance 1,550 10 1,560 140 1,700
Six months ended 30 June 2019
During the six months ended 30 June 2019, the Group disposed of
shares and subordinated debt in one PPP and two renewable energy
project companies to third parties. Total proceeds were GBP131
million.
Details of investments sold in the period ended 30 June 2019 are
as follows:
Holding
Original disposed Retained
Date of holding of holding
completion % % %
Westadium Project Holdco Pty Limited 11 March 2019 50.0 50.0 -
John Laing Rocksprings Wind HoldCo Corp 2 May 2019 95.3 95.3 -
John Laing Sterling Wind HoldCo Corp 2 May 2019 92.5 92.5 -
Year ended 31 December 2018
During the year ended 31 December 2018, the Group disposed of
shares and subordinated debt in three PPP and renewable energy
project companies. Total proceeds were GBP296.1 million.
Details were as follows:
Holding
Original disposed Retained
Date of holding of holding
completion % % %
Acquired by Jura Infrastructure Limited
Regenter Myatts Field North Holdings Company
Ltd 30 May 2018 50.0 50.0 -
Sold to other parties
Agility Trains West (Holdings) Ltd 18 May 2018 15.0 15.0 -
21 December
INEOS Runcorn (TPS) Holding Limited 2018 37.4 37.4 -
10 Financial instruments
The Group held the following financial instruments by category
at 30 June 2019:
Financial
Loans and liabilities
receivables at
Cash and at amortised Assets at amortised
cash equivalents cost FVTPL cost Total
GBP million GBP million GBP million GBP million GBP million
Fair value measurement method n/a n/a Level 1 / n/a
3 *
30 June 2019 (unaudited)
Non-current assets
Investments at FVTPL - - 1,670 - 1,670
Current assets
Trade and other receivables - 12 - - 12
Cash and cash equivalents 2 - - - 2
------------ ------------
Total financial assets 2 12 1,670 - 1,684
Non-current liabilities
Finance lease liabilities - - - (4) (4)
Current liabilities
Borrowings - - - (74) (74)
Trade and other payables - - - (16) (15)
------------ ------------
Total financial liabilities - - - (94) (94)
------------ ------------
Net financial instruments 2 12 1,670 (94) 1,590
------------ ------------
Financial
Loans and liabilities
receivables at
Cash and at amortised Assets at amortised
cash equivalents cost FVTPL cost Total
GBP million GBP million GBP million GBP million GBP million
Fair value measurement method n/a n/a Level 1 / n/a
3 *
31 December 2018 (audited)
Non-current assets
Investments at FVTPL - - 1,700 - 1,700
Current assets
Trade and other receivables - 7 - - 7
Cash and cash equivalents 6 - - - 6
------------
Total financial assets 6 7 1,700 - 1,713
Current liabilities
Borrowings - - - (66) (66)
Trade and other payables - - - (19) (19)
------------
Total financial liabilities - - - (85) (85)
------------
Net financial instruments 6 7 1,700 (85) 1,628
* The investments at FVTPL are split between: Level 1, JLEN,
which is a listed investment fair valued at GBP11 million (31
December 2018 - GBP10 million) using a quoted market price and
Level 3 investments in project companies fair valued at GBP1,524
million (31 December 2018 - GBP1,550 million). Level 1 and Level 3
investments are fair valued in accordance with the policy and
assumptions set out below. The investments at FVTPL include other
assets and liabilities as shown in note 9. Such other assets and
liabilities are recorded at amortised cost which the Directors
believe approximates to their fair value.
The table above provides an analysis of financial instruments
that are measured subsequent to their initial recognition at fair
value.
- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from
valuation techniques that include inputs to the asset or liability
that are not based on observable market data (unobservable
inputs).
There have been no transfers of financial instruments between
levels of the fair value hierarchy. There are no non-recurring fair
value measurements.
The investments at FVTPL, whose fair values include the use of
Level 3 inputs, are valued by discounting future cash flows from
investments in both equity (dividends and equity redemptions) and
subordinated loans (interest and repayments) to the Group at an
appropriate discount rate. A base case discount rate for an
operational project is derived from secondary market information
and other available data points. The base case discount rate is
then adjusted to reflect additional project-specific risks. In
addition, a risk premium is added to reflect the additional risk
during the construction phase. This premium reduces over time as
the project progresses through construction, reflecting the
significant reduction in risk once the project reaches the
operating stage. The weighted average discount rate applied as at
30 June 2019 was 8.3% (31 December 2018 - 8.6%). The discount rate
is considered the most significant unobservable input through which
an increase or decrease would have a material impact on the fair
value of the investments at FVTPL. As at 30 June 2019, an increase
of 0.25% in the discount rate would decrease the fair value of the
investments by GBP56 million (31 December 2018 - GBP52 million) and
a decrease of 0.25% in the discount rate would increase the fair
value of the investments by GBP59 million (31 December 2018 - GBP54
million).
Investments denominated in foreign currency are fair valued
based on the spot exchange rate on the balance sheet date. As at 30
June 2019, a 5% movement of each relevant currency against Sterling
would decrease or increase the value of investments in overseas
projects by c.GBP57 million (31 December 2018 - c.GBP59
million).
Cash flows from investments may be affected by future changes in
certain forecasts or where actual amounts differ from forecast
amounts in the future. The most significant observable forecasts to
which a change could have a material impact on the fair value of
investments at FVTPL are as follows: inflation and, for renewable
energy investments, power prices, marginal loss factors ("MLFs")
and energy yields. Sensitivities to the fair value of investments
at FVTPL from changes in each of these forecasts is provided
below.
A 0.25% increase in inflation on five of the larger PPP
investments with a total value at 30 June 2019 of GBP545 million is
estimated to increase their value by c.GBP15 million and a 0.25%
decrease in inflation is estimated to decrease the value by c.GBP14
million. Certain of the underlying project companies utilise some
inflation hedging.
A 5% increase in power price forecasts on seven of the larger
renewable energy investments with a total value at 30 June 2019 of
GBP272 million is estimated to increase their value by c.GBP26
million and a 5% decrease in power price forecasts is estimated to
decrease the value by c.GBP25 million.
A 5% increase in MLFs on a sample of renewable energy
investments with a total value at 30 June 2019 of GBP225 million is
estimated to increase their value by c.GBP30 million and a 5%
decrease is estimated to decrease their value by c.GBP30
million.
Our valuation of renewable energy projects assumes a P50 level
of electricity output based on reports by technical consultants.
The P50 output is the estimated annual amount of electricity
generation (in MWh) that has a 50% probability of being exceeded -
both in any single year and over the long term - and a 50%
probability of being underachieved. Hence the P50 is the expected
level of generation over the long term. A P75 output means 75%
probability of exceedance and a P25 output means 25% probability of
exceedance. At a P75 level of electricity output, the valuation at
30 June 2019 of nine renewable energy assets with a total value of
GBP304 million would reduce by GBP37 million and a P25 level of
electricity output would increase the value by GBP35 million.
For all of the above sensitivities on the portfolio value as at
30 June 2019, the Group's profit before tax would be impacted by
the same amounts described above. There would be no additional
impact on equity.
The carrying amounts of other financial assets and financial
liabilities recorded in these financial statements are
approximately equal to their fair values.
11 Retirement benefit ASSETS/(obligations)
The Group operates two defined benefit pension schemes in the UK
(the Schemes) - The John Laing Pension Fund (JLPF) and The John
Laing Pension Plan (the Plan). The Group also provides
post-retirement medical insurance benefits to 56 former employees.
This scheme, which was closed to new members in 1991, is
unfunded.
30 June 31 December
2019 2018
GBP million GBP million
Unaudited Audited
Pension schemes 14 (32)
Post-retirement medical benefits (8) (8)
Net retirement benefit assets/(obligations) 6 (40)
Analysis of the movement in the net surplus/(deficit) on the
Schemes during the period:
30 June 31 December
2019 2018
GBP million GBP million
Unaudited Audited
Opening deficit in Schemes (32) (32)
Current service cost (1) (2)
GMP equalisation charge - (21)
Finance cost - (1)
Contributions 29 27
Remeasurement gain/(loss) 18 (3)
Closing surplus/(deficit) in Schemes 14 (32)
During the six months ended 30 June 2019, the Group made deficit
reduction contributions to JLPF of GBP29 million in cash.
The financial assumptions used in the valuation of JLPF and the
Plan under IAS 19 were:
30 June 31 December
2019 2018
% %
Unaudited Audited
Discount rate 2.30 2.85
Rate of increase in non-GMP pensions in payment 3.10 3.10
Rate of increase in non-GMP pensions in deferment 2.10 2.10
Inflation - RPI 3.20 3.20
Inflation - CPI 2.10 2.10
The major categories and fair value of assets held by the
Schemes were as follows:
30 June 31 December
2019 2018
GBP million GBP million
Unaudited Audited
Bonds and other debt instruments 604 498
Equity instruments 376 352
Aviva bulk annuity buy-in agreement 228 218
Cash and cash equivalents 12 20
Total market value of assets 1,220 1,088
12 Share capital
30 June 31 December
2019 2018
No. No.
Unaudited Audited
Authorised:
Ordinary shares of GBP0.10 each 493,000,636 490,775,636
30 June 2019 31 December 2018
No. GBP million No. GBP million
Allotted, called up and fully paid: Unaudited Unaudited Audited Audited
At beginning of the period 490,774,825 49 366,960,134 37
Issued 988,593 - 123,814,691 12
Shares in issue 491,763,418 49 490,774,825 49
Issued and held by the EBT 1,237,218 - 811 -
At end of the period 493,000,636 49 490,775,636 49
The Company has one class of ordinary shares which carry no
right to fixed income.
30 June 31 December
2019 2018
No. No.
------------ -------------
Unaudited Audited
Issued under:
Rights Issue - 122,320,044
LTIP 1,878,182 1,383,367
LTIP - granted in lieu of dividends payable 108,414 77,115
DSBP 112,087 32,606
DSBP - granted in lieu of dividends payable 3,907 1,559
Shares acquired by the EBT (1,113,997) -
Total shares issued 988,593 123,814,691
------------ -------------
During the six months ended 30 June 2019, 2,225,000 shares were
issued to the EBT to satisfy awards vesting under share-based
incentive arrangements (see note 8). Of these, 1,986,596 (2018 -
1,460,482) shares were used to satisfy awards vested and exercised
under the Group's LTIP and 115,994 (2018 - 34,165) shares were used
to satisfy awards vested and exercised under the Group's DSBP
leaving 122,410 held by the EBT. Of the 2,102,590 shares vested and
exercised by employees, 1,113,997 were purchased by the EBT and
deducted from equity in the Condensed Group Balance Sheet as if
such shares were treasury shares as defined by IFRS. The shares
held by the EBT are excluded for the purposes of calculating
earnings per share and NAV per share. As at 30 June 2019, 1,237,218
shares were held by the EBT.
13 SHARE PREMIUM
30 June 31 December
2019 2018
GBP million GBP million
Unaudited Audited
Opening balance 416 218
Share premium on Rights Issue - 204
Costs of Rights Issue - (6)
Closing balance 416 416
In March 2018, the Company undertook a one for three Rights
Issue. 122,320,044 shares of GBP0.10 each were issued at 177p per
share raising GBP216 million in total, being GBP12 million of
nominal share capital (see note 12) and GBP204 million of share
premium.
14 Net cash outflow from operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Unaudited Unaudited Audited
-------------
Profit before tax 35 175 296
Adjustments for:
Net finance costs 5 6 14
Unrealised profit arising on changes in fair value of investments
(note 9) (53) (198) (366)
Share-based incentives expense 2 1 3
IAS 19 pension service cost 1 1 2
GMP equalisation charge - - 21
Contribution to JLPF (29) (27) (27)
Increase in provisions - 1 1
------------
Operating cash outflow before movements in working capital (39) (41) (56)
Increase in trade and other receivables (4) (2) (1)
(Decrease)/increase in trade and other payables (5) (2) 3
------------
Net cash outflow from operating activities (48) (45) (54)
------------- ------------
15 Commitments
At 30 June 2019, the Group held future equity and loan
commitments in PPP and renewable energy projects of GBP228 million
(31 December 2018 - GBP296 million) backed by letters of credit of
GBP99 million (31 December 2018 - GBP164 million) and cash
collateral of GBP129 million (31 December 2018 - GBP132
million).
At 30 June 2019, there were also contingent commitments,
performance and bid bonds of GBP1 million (31 December 2018 - GBP10
million).
16 Transactions with related parties
Details of transactions between the Group and its related
parties are disclosed below:
Transactions with non-recourse entities
The Group entered into the following trading transactions with
non-recourse project companies in which the Group holds
interests:
Six months Six months Year
ended ended ended
or as at or as at or as at
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Unaudited Unaudited Audited
For the period ended:
Services income* 3 6 9
Balances as at:
Amounts owed by project companies - 1 1
Amounts owed to project companies (1) (1) (1)
------------ ------------
* Services income is earned from project companies through
management services agreements and recoveries of bid costs on
financial close.
Transactions with recourse subsidiary entities held at
FVTPL:
Six months Six months Year
ended ended ended
or as at or as at or as at
30 June 30 June 31 December
2019 2018 2018
GBP million GBP million GBP million
Unaudited Unaudited Audited
For the period ended:
Management charge payable to the Group by recourse subsidiary
entities held at FVTPL - - 31
Net interest receivable by the Group from recourse subsidiary
entities held at FVTPL - - 4
Net cash transferred from investments held at FVTPL (note
9) 83 107 12
Balances as at:
Net amounts owed to the Group by recourse subsidiary entities
held at FVTPL 159 140 215
Transactions with other related parties
There were no transactions with other related parties during the
six months ended 30 June 2019.
17 Events after balance sheet date
In July 2019, the Group agreed an investment of approximately
GBP62 million in the Ruta del Cacao road project in Colombia. This
investment is expected to complete in September 2019.
In August 2019, the Group completed an investment of
approximately GBP75 million in a wind farm in the US.
Dividend timetable
The interim dividend is proposed to be paid on 25 October 2019
to holders of ordinary shares on the register on 27 September 2019.
The ex-dividend date will be 26 September 2019.
DIRECTORS AND ADVISERS
Executive DIRECTORS Auditors
Olivier Brousse EP ENPC Deloitte LLP
Chief Executive Officer Statutory Auditor
Luciana Germinario 1 New Street Square
Chief Financial Officer London EC4A 3BZ
Non-executive directors Solicitors
Will Samuel BSc BA FCA Freshfields Bruckhaus Deringer LLP
Chairman 65 Fleet Street
Andrea Abt MBA London EC4Y 1HS
Anne Wade BA MSc Independent valuers
David Rough BSc Hons KPMG LLP
Jeremy Beeton CB BSc CEng FICE 15 Canada Square
Toby Hiscock MA (Oxon) FCA London E14 5GL
Company secretary Registrars
Clare Underwood BSc, ACA Equiniti
Group Company Secretary Aspect House
Registered office Spencer Road
1 Kingsway Lancing
London WC2B 6AN West Sussex BN99 6DA
PRINCIPAL GROUP BANKERS
Barclays Bank PLC ABN Amro Bank NV
1 Churchill Place Gustav Mahlerlaan 10
London E14 5HP 1082 PP Amsterdam
HSBC UK Bank plc The Netherlands
71 Queen Victoria Street AIB Group (UK) PLC
London EC4V 4AY St Helen's, 1 Undershaft
Australia and New Zealand Banking Group Limited London EC3A 8AB
40 Bank Street National Australia Bank Limited
London E14 5EJ 88 Wood Street
MUFG Bank, Limited London EC2V 7QQ
Ropemaker Place
25 Ropemaker Street
London EC2Y 9AN
Sumitomo Mitsui Banking Corporation
99 Queen Victoria Street
London EC4V 4EH
Crédit Agricole Corporate and Investment Bank
Broadwalk House
5 Appold Street
London EC2A 2DA
Joint Stockbrokers
Barclays Bank PLC
5 The North Colonnade
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
John Laing Group plc
Registered Office:
1 Kingsway
London
WC2B 6AN
United Kingdom
Registered No. 5975300
Tel: +44 (0)20 7901 3200
Fax: +44 (0)20 7901 3520
www.laing.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BFLLLKVFBBBK
(END) Dow Jones Newswires
August 22, 2019 02:01 ET (06:01 GMT)
Grafico Azioni John Laing (LSE:JLG)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni John Laing (LSE:JLG)
Storico
Da Apr 2023 a Apr 2024
